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Twitter deal: These are the legal issues Elon Musk faces after reneging on buyout

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Yahoo Finance's Alexis Keenan breaks down potential legal issues Elon Musk faces should Twitter follow through on its plans to take the Tesla CEO to court over breaking the buyout contract.

Video Transcript

AKIKO FUJITA: Twitter's stock today sliding down more than 7% right now with a legal battle brewing in Delaware. Twitter vowing to sue Elon Musk to force the sale of the social media giant after the Tesla CEO said on Friday he would terminate that $44 billion deal, citing specifically concerns about its data on spam accounts. Joining us to discuss is Alexis Keenan on the legal beat for us.

And Alexis, let's talk about what specifically he laid out in terms of the concerns in this filing where he says he's going to terminate the deal. The spambots, something that he's talked about for some time, that 5% number Twitter has disclosed in the past. Does Elon Musk have any legal footing here?

ALEXIS KEENAN: Maybe, right? To play the devil's advocate. A lot of reports out there say that he's not on good legal footing here. But here's what he's alleging.

He makes two different types of claims about these spambots. One, he's saying that Twitter has breached the agreement for the purchase of this company by not handing over detailed, useful information to Musk that he can then analyze independently to try to figure out if that 5% number is accurate or not. Secondly, he makes sort of an alternative claim where he says, if those numbers are not accurate-- which we don't know at this point. If they're not, then there's a material adverse effect that would affect the valuation that he made and offered for Twitter to say that, look, this is so severe that it must undo the contract.

AKIKO FUJITA: So there's been a lot made here about where this is all going to play out in Delaware, the Chancery Court. We saw those several reports over the weekend, both sides lawyering up. How is this venue specifically different?

ALEXIS KEENAN: So the Delaware Chancery Court is no stranger to monster battles over mergers and acquisitions. These are sophisticated judges, chancellors, who will be deciding this case. If Twitter does, in fact, go forward and file a lawsuit, that's where it will be held.

Now, the court is so sophisticated that it's said by a lot of legal experts that I've been talking to that they're not going to be persuaded just because billionaire Elon Musk walks into the courtroom, that they're used to dealing with billionaires all the time. They're used to handling these disputes all the time. And they're not going to bend the longstanding rules of corporate law in order to vote him favor.

AKIKO FUJITA: Hmm. Hard to say which side comes out. But it feels like this is just the beginning of an epic legal battle.

ALEXIS KEENAN: It could be. But on the other hand, the Chancery Court is noted for being rather swift in their decisions. So I've been told that if Twitter does file, that a decision could come down within months. So maybe we will see at least that part of the battle end sooner.

But then again, we also have to ask whether, even if the court were to enforce the contract against Musk, force him to buy the company, let's say, will he then even comply? Will he turn his nose up at something like that? We don't know.

AKIKO FUJITA: So at least several more months of talking about Elon Musk and Twitter.

ALEXIS KEENAN: At least.

AKIKO FUJITA: All right, Alexis Keenan, thanks so much for that.