‘Could put him in jail’: Bold claim after Elon Musk’s Twitter fiasco

There is talk Elon Musk could face a heavy penalty for scrapping his $66 billion deal with Twitter, as the company’s stock plunges.

A US financial journalist surprised his fellow panellists on Monday by asserting that Elon Musk’s upcoming legal battle with Twitter over their nixed $US44 billion ($65.5 billion) takeover agreement could result in jail time for the eccentric billionaire.

CNBC’s David Faber made the bold claim during a discussion with fellow CNBC personalities Jim Cramer and Carl Quintanilla regarding Musk’s decision to walk away from the agreement due to concerns about spam bots within Twitter’s user base, the New York Post reports.

Cramer quipped that Twitter’s board was “in trouble” if their lawsuit only resulted in the company recouping a $US1 billion ($1.49 billion) break-up fee from Musk.

“There’s no way they’re going to take the walkaway fee,” Faber said. “They have specific performance in the contract. They are going to have a Delaware judge enforce that contract and say, these are the reasons why.”

Elon Musk pulled the plug on his deal to buy Twitter, accusing the company of ‘misleading’ statements about the number of fake accounts. Picture: Brendan Smialowski/AFP

“Then the question is, OK, you are forcing Mr Musk to buy the company, does he actually agree to do it?” Faber added.

“There is this argument being said lately that, well, maybe he won’t comply with that. Then we would have a situation where they could put him in jail.”

Faber’s remark, first reported on by Mediaite, drew surprised laughter from Quintanilla, who called the idea of Musk going to jail over the nixed deal “funny”.

“I know you laugh, but that’s where we could end up,” Faber said. “This is a man who doesn’t play by the rules.”

Nevertheless, it’s not the first time experts have speculated over the prospect of Musk landing in the slammer over the Twitter mess. In May, Columbia law professor John Coffee told Fox Business News’ Charlie Gasparino that even in a civil suit, Musk could be slapped with contempt of court charges that could lead to jail.

“Twitter can sue for an injunction ordering him to close,” Gasparino tweeted on May 18, noting that the law professor called it a “very unusual but plausible” scenario. “If he violated that injunction, he could go to jail for contempt until he complied.”

Twitter shares plunged after the announcement. Picture: Chris Delmas/AFP

Over the weekend, Bloomberg columnist Matt Levine noted the possibility that Musk could refuse to buy Twitter even if a Delaware court orders him — but also appeared sceptical that jail was a possibility.

“What if the court orders Musk to close the deal and he says no? They’re not gonna put him in Chancery jail,” Levine wrote.

“The guy is pretty contemptuous of legal authority; he thinks he is above the law and he might be right. A showdown between Musk and a judge might undermine Delaware corporate law more than letting him weasel out of the deal would,” he added.

Cramer jumped in on Monday to note that Faber’s assertion was likely to make waves with viewers.

“David, the takeaway is going to be ‘Faber says Musk going to jail.’ You’ve got about 10 seconds to repeal that,” Cramer quipped.

Cramer again expressed shock in a tweet posted after the segment aired.

“Jail!?” Cramer tweeted.

Musk has yet to respond to Faber’s comments. The Post reached out to CNBC and Musk’s office for comment.

There is a suggestion Musk could face jail for nixing the multi-billion dollar deal. Picture: Maja Hitij/Getty Images

Musk has already laughed off Twitter’s looming lawsuit, poking fun at the company’s board in a series of memes.

Musk’s camp indicated in a US Securities and Exchange Commission filing on Friday the billionaire was backing out of the Twitter deal.

His legal team said that Twitter has repeatedly avoided inquiries about the number of spam bots within its user base – with Musk arguing that the number is far higher than the company claims.

Meanwhile, Twitter has already lawyered up and indicated it plans to pursue legal action to compel Musk to follow through on his original $US44 billion offer. The company is expected to file suit in a Delaware court by early this week.

Twitter faces ‘nightmare scenario’

Twitter shares plunged Monday in the first day of trading since Musk abandoned the deal — and one tech industry analyst warned of a potentially disastrous long-term scenario for the embattled social media firm.

Twitter’s stock sank 11 per cent as investors reacted to the exit, the New York Post reported.

Musk’s move that sets up a lengthy court battle likely to weigh on company shares for months or years to come and added to the challenges facing CEO Parag Agrawal, according to Wedbush analyst Daniel Ives.

“For Twitter this fiasco is a nightmare scenario and will result in an Everest-like uphill climb for Parag & Co. to navigate the myriad of challenges ahead around employee turnover/morale, advertising headwinds, investor credibility around the fake account/bot issues, and host of other issues abound,” Mr Ives said.

Twitter’s board has already indicated it intends to sue Musk to close the deal at its original $US54.20 per share sale price.

Twitter has signalled it will take legal action to enforce the deal. Picture: Amy Osborne/AFP

Investors are likely to price in the possibility of a court battle resulting in a victory for Twitter, whether through a sale at a different price to Musk or through recouping the $US1 billion break-up fee included in the original takeover agreement, according to Mr Ives.

“That said, this is going to be a long and ugly court battle (Twitter has already hired counsel) ahead in which the fake account/bot issue will be scrutinised for all to see and casts a dark cloud over Twitter’s head in the near term,” Mr Ives said.

“The legal issues could last into 2023 and in the meantime Twitter is a public company that needs to navigate day-to-day operations with many challenges ahead with its stakeholders.”

Wedbush has a 12-month price target of $30 for Twitter shares – below the roughly $32 threshold at which the company’s stock currently trades.

While Twitter is widely seen as having the upper hand in a court battle with Musk due to the terms of its agreement with the billionaire, the long-term outlook for a resolution to the dispute is murky at best.

Twitter isn’t the only entity that stands to take a hit from the legal drama. Mr Ives noted that investors will view the situation as a “black eye” for Musk, who may have gotten buyer’s remorse during a broader downturn in the stock market and opted for a hasty exit.

“In a nutshell this is a ‘code red’ situation for Twitter and its board as now the company will go head to head against Musk in a Game of Thrones court battle to recoup the deal and/or the break-up fee of $1 billion at a minimum,” Mr Ives added. “We see no other bidders emerging at this time while legal proceedings play out in the courts.”

This article originally appeared on the New York Post and was reproduced with permission