Late last week, Elon Musk’s attorneys from Quinn Emanuel put forth an unconventional argument in an investor suit alleging that Musk’s public comments and litigation efforts around his Twitter acquisition were a ploy to lower the share price. The defense’s line of reasoning was simple: no one could reasonably believe Musk’s declarations. In what resembles the infamous “Animal House” defense — “you trusted us, and that was your mistake” — Musk’s camp tried to convince the court that the market knew better.
The presiding judge, Charles Breyer, expressed skepticism. After initial grandstanding about buying Twitter to eliminate bots and promote his version of “free speech,” Musk signed a purchase agreement that waived various buyer protections, including due diligence rights. When he grew hesitant about the deal, ironically blaming the very bot issue he aimed to resolve, Musk staged a public attempt to withdraw. This prompted Twitter to file a lawsuit, which Musk contested until he eventually conceded. The plaintiffs argue that Musk’s actions were designed to devalue Twitter’s stock, costing investors significant amounts of money (Bloomberg Law).
Musk’s legal team asserted that investors knew his wavering stance on buying Twitter in 2022 was hollow, as they were aware he was legally bound to proceed with the purchase. This is paradoxical, given that Musk engaged in extensive litigation over this matter. Regardless of his underlying reasons — whether to create financial pressure for a better deal or to contest the purchase genuinely — his involvement in prolonged legal battles makes it difficult to accept the argument that no investor could have underestimated his commitment.
While Musk’s case against Twitter seemed strong at the outset, Judge Breyer pointed out that setting a precedent where shareholders make assumptions about litigation outcomes is problematic. It was noted in various academic circles at the time that there were arguments, albeit weak ones, suggesting Musk might walk away from the deal. These claims, however flimsy, were enough to convince some observers that Musk’s threats carried some weight (Above the Law).
The challenge for Quinn Emanuel here is that while their argument contains a degree of truth — the consensus was indeed that Musk had little chance of winning against Twitter — it is less compelling legally when their client publicly spent months arguing otherwise.
For further details, you can read the full article on Above the Law.