Musk's legal team will be allowed to use Zatko payments as part of a case against the Twitter deal

Musk’s legal team will be allowed to use Zatko payments as part of a case against the Twitter deal

I don’t know this will change the deal, but…

In the latest move in the run-up to Twitter’s upcoming court battle against Elon Musk, Delaware District Judge Kathleen McCormick ruled today that Musk’s team They will be allowed to modify their counterclaimsin their bid to get out of Musk’s $44 billion takeover bid to include Twitter’s payout to former security chief Peter Zatko as an element, which Musk’s team claims would infringe on the original deal.

In June, Twitter agreed to a settlement with Zatko as part of his exit from the company, which would eventually see Zatko return home. $7 million payout to his agreement. Musk’s team says that amount violates the original merger agreement, which, in his view at least, stipulated that Musk himself should be consulted about any significant management changes and expenses, as the company’s next president.

Since Musk was not consulted in this case, the view is that Musk’s team may be able to use this as an example of Twitter’s failures to comply with the original terms, which could provide an exit path for Musk.

Although it may not be that clear.

Twitter has already refuted this, and all of Musk’s other claims regarding the original terms of the deal, which, according to Twitter, is backed by “court” obligations From the Musk team.

This specific example relates to Section 6.1 of merger proposalwho notes that

[Twitter] shall use its commercially reasonable efforts to conduct the business of the Company and its subsidiaries in the ordinary course of business, and to the extent consistent therewith, the Company shall use its commercially reasonable efforts to maintain substantially the physical components of its present business organization. . “

That includes key employees, with the full text essentially stating that Twitter will need to consult with Musk, as the next owner, about any major changes.

Which Musk’s team has already tried to pin Twitter on regarding the exits of key managers.

according to Musk team:

“Twitter also failed to comply with its obligations under Section 6.1 of the merger agreement to obtain and obtain consent before departing from its obligation to conduct its business in the normal course and to “keep the physical components of the existing labor organization substantially intact.” Twitter’s conduct in the dismissal of two key high-level employees, the revenue product leader and general manager of consumers, as well as the July 7 announcement of the layoff of one-third of its talent acquisition team, implies the provision of the regular training course.”

Musk’s team says that because Twitter has not received Musk’s approval of these changes, this is a violation of the merger agreement. In their view, Zatko’s huge return is another example of Twitter’s behavior in this regard, which together he hopes will help him build his case to exit the deal, and save Musk from his $44 billion commitment.

Of course, Musk’s biggest problem, or at least the one he publicly mentions, is with bots on the platform, and Twitter’s claims that only 5% of its active user base are bot/spam accounts. Musk says that number should be higher than this, based on his own experience and the experience of other users. And if, in fact, more than 5% of active Twitter accounts are bots, this complicates any calculation in terms of monetization prospects, since non-user profiles do not interact with ads.

This argument makes sense, but Twitter says that Musk agreed to buy the platform essentially “as is,” ceding various due diligence measures that may have enabled him to walk out of the deal on that item.

Which is why Musk’s legal team is now looking at alternative avenues, and the court may see Zatko’s exit and push as an important enough decision to start this element of the contract.

But Twitter’s legal team seems pretty confident that it’s on solid ground and on all fronts. Does the fact that the court will allow this in consideration change anything in this regard?

We’ll find out very soon, as the trial is set to begin on October 17th.

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