Twitter’s Odd Victory Over Elon Musk

Then again, maybe congratulations are due Delaware Court of Chancery Chancellor Kathaleen McCormick, who apparently was unwowed by Mr. Musk’s aura and perhaps realized that if Delaware companies can’t expect enforcement of solemn legal contracts, they may be less keen in the future to place themselves under jurisdiction of the court she represents.

Of course, Mr. Musk has only signed another piece of paper, a letter to Twitter’s board saying he wants to proceed. What is his written commitment worth? Presumably less than before he made a global spectacle of himself by reneging on the original deal. Perhaps explanation of his reversal will be soon forthcoming from Mr. Musk himself on his favorite medium—Twitter. For now, sufficient must be the reporting of Bloomberg News, which broke the story and attributed Mr. Musk’s white flag to the realization by his “legal team . . . that the case was not going well.”

Duh. Mr. Musk’s case was far from strong, as pointed out here in July, and furthermore the dispute threatened to pop the mystique that upholds

Tesla’s

all-important share price, a likelihood that only grew with the prospect of Mr. Musk being questioned on the stand about his now-released antic private text messages. Mr. Musk might well have hoped that the Musk aura that so confounded, for instance, the Securities and Exchange Commission when it tried to make him behave like a normal CEO would also work with the Delaware court and Twitter. They would shrink from forcing the mercurial entrepreneur to proceed with the purchase of an important public company that he had turned to ridiculing and accusing of fraud.

Which brings up a question: If you’re Twitter, what do you do now? Your shareholders presumably want you to hold Mr. Musk to the deal, which would get them $54.20 a share for a stock that might be worth single digits if not for moneybags Musk. A conscientious management, though, might balk at delivering the company to a man who doesn’t want to own it, has bad-mouthed it, and is plainly surrendering only to legal force majeure to become its apparently unenthused proprietor.

This could be another case for the Delaware court down the road. Twitter’s board right now says it’s keen to go ahead, as you would expect, but if you truly doubted Mr. Musk’s stewardship, you might prefer an outcome in which he pays a large sum in damages and goes away. Once upon a time, in a controversial 1989 case, the very same Delaware court ruled that a board could reject even a top-dollar takeover offer for just such a “strategic” reason.

Twitter’s share price soared on the news, to within $2 of Mr. Musk’s $54-plus offer, a valuation that Twitter shareholders might not expect to see again in their lifetimes. Tesla’s stock was down for the reciprocal reason: Mr. Musk may be forced to sell more of his stake to fund his Twitter purchase. How much more may be affected by a wrinkle yet to be seen: So far Mr. Musk’s once-willing partners and lenders claim to be on board, but they have lawyers and every reason to find in Mr. Musk’s behavior grounds to renege now on such an unfavorably priced takeover. Weighing on Tesla as well is the distraction if Mr. Musk must start devoting his time to running Twitter to protect his forced investment in the company.

That said, Twitter remains every bit the important and widely used “public square” that Mr. Musk once described it, even if it’s no great shakes as a business. Since the Musk drama started, Twitter has demonstrated as much again by serving as a clearinghouse for news and analysis of the war in Ukraine, making a new class of worthy thinkers into public figures beyond their previous imaginings. Never doubt Twitter’s considerable intellectual value even if, by simple volume, most of what crosses the platform is dreck from no-account attitudinizers, bots and scam artists.

Interestingly, in 1989, it was thought the Delaware court ruled as it did partly because the deal in question would have delivered into the hands of the late corporate swashbuckler Martin Davis the then widely read Time magazine, seen as a national asset and pillar of democratic discourse. Mr. Musk may yet prove the innovative owner Twitter needs, but it will be a curious outcome for the courts to have forced the controversial kibitzer to become the steward of an important global institution that he seems unglad to have responsibility for.