The Twitter Lawsuit Could Be Very Bad for Elon Musk

Photo: Jonathan Newton/The Washington Post via Getty Im

Elon Musk wants to walk away from his blockbuster Twitter deal, but it won’t be easy. On the latest Pivot podcast, Kara Swisher and Scott Galloway discuss the legal battles ahead — Twitter officially filed suit against Musk on Tuesday afternoon — and why a drawn-out court battle could be bad for the world’s richest man.

Kara Swisher: Twitter is assembling a legal team — a very tough one — and as of our taping on Monday has plans to sue Elon Musk for dumping his $44 billion takeover of the company. It’s a necessary step here, but we’ll see where it goes. Elon is said to have hired the same firm that defended him previously in his “pedo guy” defamation case in the aftermath of his “funding secured” tweet. And Donald Trump even weighed in on the situation at a rally in Alaska over the weekend. He’s lost his friend Donald. We’re going to play that clip:

Trump: Elon is not going to buy Twitter. Where did you hear that before? From me. From me. Nah, he’s got himself a mess. You know, he said the other day, “Oh, I’ve never voted for a Republican.” I said, “I didn’t know that. He told me he voted for me.” So he’s another bullshit artist, but he’s not going to be buying it. He’s not going to be buying it.

Swisher: Wow. He actually called Elon “Leon” at the beginning of that. He was rambling quite a bit. Twitter co-founder Ev Williams tweeted, “If I was still on the board, I’d be asking if we can just let this whole ugly episode blow over. Hopefully that’s the plan and this is ceremony.” What do you think? Lower price? New prediction, Scott?

Scott Galloway: No, he doesn’t want a lower price. They’re not going to give him a lower price because they can’t trust anything he says. I want to be clear here: I have a bias, and I might be projecting. But I know these board members; I know of the abuse he has subjected them to. I know the literally thousands of man- and woman-years he has wasted. Do you realize he had every banker on the debt side or the capital-market side at Morgan Stanley roaming the Earth to raise $12 billion, of which they would get nothing now? And I don’t think they had an automatic fee.

Swisher: Yeah, Bill Cohan pointed this out. They’re pretty pissed. The bankers are pissed.

Galloway: If you look at the list of information requests he made, he included things as esoteric as what was the valuation method used by Goldman Sachs to issue the fairness opinion for Twitter to get approval from the board. That serves no useful utility or insight other than to create more trip wires so he could say that they didn’t live up to their information transfer requirements and that he can back out of the deal.

So I would imagine, and I might be wrong, that two things are happening here. And I don’t understand the law, but I understand human nature among the very confident-slash-narcissistic men the majority of this board and this organization called Tesla are run by. And that is he has abused these people, and they have —

Swisher: I don’t think they’re going to do anything, Scott. I think you’re wrong. They’re not.

Galloway: Okay.

Swisher: I think they’re scared.

Galloway: They’re taking him to court. What do you mean they’re not going to do anything?

Swisher: I think they’re scared, and they want to get out of this. They want to get him away from them. What I’d ask is for him to sell back his shares. He sells his shares, maybe at a loss, pays the billion dollars and goes. I would let him just move. I know we’re like “justice against Elon,” but I think the board wants to get out of this. Employees are pretty pissed, too, I’ll tell you that.

Galloway: Let me just acknowledge the majority of smart, thoughtful people I talk to agree with what you just said. I believe that there’s a lot of ego involved here and that the Twitter board has said, “Here’s 50 million to Wachtell,” and said, “Pursue this guy to the end of the Earth.”

And the other thing I don’t agree with that’s in the narrative right now is that this process will be distracting and damaging for Twitter. I think it’s going to be much more damaging for Elon Musk because all that will come out is that he’s lied consistently and been a bad actor. If you look at the Twitter board here, they, in my opinion, have handled themselves perfectly. They did exactly what they were supposed to do as fiduciaries.

Swisher: Well, there’s a lot of anger within Twitter, within the employee base, which has been hearing, “Everything will be fine.” General manager Nick Caldwell wrote a memo to staff saying, “I do think we’ll be okay.” I think they’re sick of that. There’s a lot of rancor. A lot of people are looking. Casey Newton wrote a lot about this really smartly the other day. I think they hired Wachtell to scare him into settlement. And I think that is where it’s going to go is a settlement of some sort sooner than you think. I don’t think they want this to go into court by any means at all. It’s not good for anybody. Even if it’s bad for Elon, I think there’s no hurting this guy, right? I mean, he blocked Scott Galloway, right? He doesn’t have any sense.

Galloway: Look, I have a real bias here, but I think this represents on so many levels this idolatry of innovators that needs to stop.

Swisher: I think he’s just trouble. Let’s just get him in our rearview mirror.

Galloway: Him being shameless is a superpower. Donald Trump was able to get away with all sorts of illegal behavior because the judge and the person on the other side go, “He’ll just continue to lie and come up with different reasons to appeal and just keep fighting and say whatever’s required and lie to people and start shit-posting us.” I don’t know, Kara.

Swisher: I don’t think they’re the sheriff that’s going to do this. Maybe someone else will have the balls to do it to this guy, but I just think it’s a waste of their time. Ultimately, you have to do a cost-benefit analysis, and there’s no benefit from fighting with him publicly. There isn’t. The drama needs to end. There’s way too much drama around this company. And believe me, I think he’s acted abominably.

Galloway: I don’t think they’re going to let him off that easy.

Swisher: All right, we’ll see. We’ll see about that. I think he’s going to be swimming in lawsuits, though.

Galloway: And it’s going to cause shareholder lawsuits. All these shareholders are like, “Okay, you have significantly damaged my economic well being by doing ahead by A, not disclosing that you were buying shares when you were supposed to.” So a lot of people sold shares for less than they would’ve gotten had he made the disclosure. What’ll be interesting in discovery is — if it goes that far, as I think — we’ll get to find out if there were other bidders and who they were.

Swisher: Yeah. I don’t think there were, though. Right? Well, who knows? And the other thing is that the SEC, they should have stepped in a long time ago on Elon in a much more significant way. They didn’t. They let this happen in a lot of ways, this kind of behavior. So I think if it does go far, the Delaware Chancery Court is the sheriff that is needed. That will probably slap Elon back to last Sunday, but we’ll see. But nonetheless, I’m so sorry he blocked you. I will keep you informed of his movements if you’d like, and others can, too.

Galloway: It’s a cry out for my attention; let’s be honest.

This transcript has been edited for length and clarity.

The Twitter Lawsuit Could Be Very Bad for Elon Musk