Levine: The Price of Not Buying Twitter

Matt Levine’s savvy take on the mess Elon has left in his “laws don’t apply to me” wake:

Bloomberg headline: The Price of Not Buying Twitter

Subheadline: Also Twitter miscellanea, Celsius and Axie.

By Matt Levine
July 11, 2022, 4:14 PM UTC


Matt Levine for the win in some of the opening paragraphs of this very long opinion piece:

In contract law, that is the normal remedy for breach of contract. It is called “expectation damages.” If Musk signed a deal to buy a thing for $54.20, and then he refused to pay and had no good reason for backing out of the deal, and the seller had to turn around and sell the thing to someone else for $25 instead, then the seller could go to court and demand that Musk pay the $29.20 difference.

Merger agreements are contracts, and in theory a jilted seller could sue a buyer for expectation damages, but in practice merger agreements often limit the availability of damages. In particular, the Twitter merger agreement (Section 8.3(c)) says that Twitter can’t get more than $1 billion of damages from Musk, which is also the amount of the reverse termination fee that Musk has to pay Twitter in certain circumstances. 3

So if Musk has no good reason to walk away from the deal — and I think he obviously does not, though he’ll argue otherwise in court — and Twitter sues him for damages, it can’t get more than $1 billion. Its actual expectation damages are something like $24 billion. The capped damages are nowhere close to enough to compensate Twitter for the lost deal.