Rumor has it that Elon Musk could face heavy penalties for pulling out of his $66 billion Twitter deal as the company’s shares plummet.
An American financial journalist surprised his colleagues on Monday by saying that Elon Musk’s upcoming legal battle with Twitter over their $44 billion ($65.5 billion) failed takeover deal could land the eccentric billionaire in jail.
CNBC’s David Faber made the bold statement during a discussion with fellow CNBC figures Jim Kramer and Carl Quintanilla regarding Musk’s decision to withdraw from the agreement due to concerns about spambots among Twitter users, New York Post reports.
Kramer joked that Twitter’s board of directors were “in trouble” if their lawsuit only resulted in the company reimbursing the $1 billion ($1.49 billion) fee for breaking up with Musk.
“They won’t charge an exit fee for anything,” Faber said. “They have a specific performance in the contract. They’re going to have a Delaware judge enforce this contract and say that’s why.”
“Then the question is, well, you are forcing Mr. Musk to buy the company, is he really willing to do it?” Faber added.
“Recently, there has been such an argument that, well, maybe he will not submit to this. Then we would have a situation where he could be put in jail.”
Faber’s remark, first reported by Mediaite, prompted a surprised laugh from Quintanilla, who called the idea of Musk going to jail over a failed deal “funny.”
“I know you’re laughing, but this is where we can go,” Faber said. “He’s a man who doesn’t play by the rules.”
However, this isn’t the first time experts have speculated that Musk could end up in jail over his Twitter mess. In May, Columbia University law professor John Coffey told Fox Business News’ Charlie Gasparino that even in a civil lawsuit, Musk could be charged with contempt of court, which could lead to jail time.
“Twitter could sue for an injunction ordering it to shut down,” Gasparino wrote on May 18, noting that the law professor called it a “very unusual but plausible” scenario. “If he violated that injunction, he could go to jail for contempt of court until he complied.”
Over the weekend, Bloomberg columnist Matt Levin noted the possibility that Musk might refuse to buy Twitter even if a Delaware court ordered him to, but was also skeptical about the possibility of jail time.
“What if the court orders Musk to close the deal and he says no? They won’t put him in a clerical prison, ”Levin wrote.
“This guy is pretty dismissive of legal authority; he thinks he is above the law and he may be right. A showdown between Musk and the judge could undermine Delaware’s corporate law more than if he allowed him to evade the deal,” he added.
Kramer chimed in on Monday to point out that Faber’s assertion is likely to make waves in viewers.
“David, the conclusion will be: “Faber says that Musk will go to jail.” You have about 10 seconds to undo it,” Kramer joked.
Kramer again expressed shock in a tweet posted after the segment aired.
“Prison !?” Kramer tweeted.
Musk has yet to respond to Faber’s comments. Mail reached out to CNBC and Musk’s office for comment.
Musk has already poked fun at Twitter’s impending lawsuit by mocking the company’s board of directors in a series of memes.
Musk’s camp is listed in a US Securities and Exchange Commission statement on Friday when the billionaire backed out of his Twitter deal.
Its legal team said Twitter has repeatedly avoided requests. about the number of spambots in your user base — with Musk claiming the number is much higher than what the company claims.
Meanwhile, Twitter has already secured legal support and said it plans to take legal action to force Musk to honor his original $44 billion offer. The company is expected to file a lawsuit in a Delaware court earlier this week.
Twitter faces ‘nightmare scenario’
Shares of Twitter tumbled Monday on the first day of trading after Musk pulled out of the deal, and one tech industry analyst warned of a potentially catastrophic long-term scenario for the social media company.
Twitter shares fell 11% as investors reacted to the company’s exit. New York Post reported.
Musk’s move, which creates a lengthy legal battle that could affect the company’s stock in the coming months or years, has exacerbated the problems facing CEO Parag Agrawal, according to Wedbush analyst Daniel Ives.
“For Twitter, this fiasco is a nightmare scenario that will lead to the climb of Everest for Parag & Co. to deal with the myriad challenges ahead of employee turnover/morale, promotional headwinds, investor confidence in fake account/bot issues, and a host of other issues,” Mr. Ives said.
Twitter’s board has already said it intends to sue Musk to close the deal at the original price of $54.20 per share.
Investors will likely appreciate the possibility of a litigation leading to a Twitter victory, whether through a sale at a price different from Musk’s or by recovering the $1 billion gap fee included in the original takeover agreement by the words of Mr. Ives.
“However, this is going to be a long and ugly legal battle (Twitter has already hired a lawyer) in which the fake account/bot issue will be scrutinized for all to see and a cloud will cloud over Twitter’s head in the near future. Mr Ives said.
“Legal issues could last until 2023, and in the meantime, Twitter is a public company that needs to navigate its day-to-day work with many stakeholder issues.”
Wedbush has a 12-month price target for Twitter shares of $30, below the roughly $32 threshold at which the company’s shares currently trade.
While many believe Twitter has the upper hand in the Musk lawsuit over the terms of the billionaire deal, the long-term prospects for a resolution are dim at best.
Twitter is not the only organization that could be affected by the legal drama. Mr. Ives noted that investors would view the situation as a “black eye” for Musk, who may have experienced buyer remorse during a broader stock market downturn and decided to rush out.
“In short, this is a code red for Twitter and its board of directors as the company now comes face to face with Musk in Game of Thrones litigation to recover a deal and/or a gap fee of at least $1 billion,” Mr. Ives added. “At this time, we are not seeing other bidders while the litigation plays out in the courts.”
This article originally appeared on New York Post and reproduced with permission
Originally published as “May put him in jail”: a bold statement after the Elon Musk fiasco on Twitter