Last week, Elon Musk filed to terminate his $44 billion acquisition of Twitter (TWTR), and Twitter sued Musk in response earlier this week to force Musk to complete the deal. Notably, Twitter said that it “is entitled to specific performance of defendants’ obligations under the merger agreement,” or that under a specific performance clause, Twitter says it can force Musk to complete the deal, even if he doesn’t want to anymore, as long as he has the debt finance in place to close the deal.
Twitter complained that Musk “mounted a public spectacle to put Twitter in play,” and having proposed and signed the acquisition agreement, “believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.” Musk and Twitter had announced the $54.20 per share acquisition on April 25, and after hitting a four-month high following the agreement, shares of Twitter have fallen 29%. Shares of Twitter lost over 5% of their value in the last two weeks, and are down over 16% so far this year.
Courts have rewarded specific performance in M&A cases before, but none of them have been nearly as large as the $44 billion Twitter acquisition. Other possible outcomes could include Musk agreeing to pay monetary damages to Twitter for breaking the deal, or the two renegotiating the acquisition at a different price.