Reports in the media that ‘Elon Musk’ agreed to buy Twitter for $44 billion are misleading and causing a LOT of confusion among journalists and readers. The transaction Musk proposed to Twitter’s board is called a Reverse Triangular Merger.1 Under Musk’s proposal, he would create two new shell companies - a parent and a subsidiary. Neither of these companies would have any assets other than contingent equity and debt commitments. If successful the transaction would result in Twitter merging with the subsidiary and the parent paying Twitter’s former shareholders $44 billion in cash. In the event that something went wrong and the deal didn’t close the parties agreed to limit money damages to $1 billion less legal and accounting expenses incurred by the breaching party. While the Merger Agreement allowed Twitter to demand specific performance from the parent company - the fact that it was a shell without assets made the remedy meaningless. Contrary to reports in the media Elon Musk isn’t buying Twitter but instead a shell company called X Holdings I Inc.

Today it was reported2 3 that Twitter hired Wachtell, Lipton, Rosen & Katz4 (Wachtell) to file suit against X Holdings I Inc. and presumably Elon Musk. The firm’s founder, Marty Lipton, is well-known in Delaware’s Court of Chancery and is no stranger to the state’s decade-old Complex Commercial Litigation Division (CCLD)5. Reportedly Wachtell will file this week in the CCLD and request an expedited proceeding. Given the fact that the parties have agreed to limit damages to less than a billion dollars Wachtell’s only option is to convince the court that Elon is simply having a case of buyer’s remorse and that they should force X Holdings I Inc. to close on the transaction. For that, to work Wachtell will need to try this case before the holidays.