Confiscating Tesla shares is 1 of the 4 ways the court could force Elon Musk to comply with orders
TLDR: According to Robert Miller, a law professor, there are 4 ways to “force” Elon to comply to the $Twitter (Delisted) (TWTR.US)$ deal if the judge ruled that he have to purchase Twitter.
1. “Special Master” can be appointed to “replace” Musk and complete the deal.
2. Take over Musk’s $Tesla (TSLA.US)$ shares and use that as payment to Twitter.
3. Fine Musk $millions per day until Musk complies with the request.
4. As a last resort, send Musk to jail.
1. “Special Master” can be appointed to “replace” Musk and complete the deal.
2. Take over Musk’s $Tesla (TSLA.US)$ shares and use that as payment to Twitter.
3. Fine Musk $millions per day until Musk complies with the request.
4. As a last resort, send Musk to jail.
Disclaimer: Before we start expanding our knowledge, I must first say that this piece does not implies that Twitter will win, or Elon will win. I know some fanboys are ready to pounce given the chance ![]()
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. Today these power might help Twitter but tomorrow these same power might help Tesla. These powers are fair, it doesn’t care who you are, it is there to help the victims.
Whatever I say or any other people say hold no water because we aren’t legally trained. Therefore, I tend to heed advice from legal expert instead. Here is just some notes taken from legal experts, sharing it to improve our knowledge of how the world is really like.
Whatever I say or any other people say hold no water because we aren’t legally trained. Therefore, I tend to heed advice from legal expert instead. Here is just some notes taken from legal experts, sharing it to improve our knowledge of how the world is really like.
Story time
As the Twitter v Musk saga continues, there have been many opinions on the matter, and one of the most contested discussion is about whether the Delaware Court of Chancery have any power to force Musk to comply if he does not want to.
Using common sense, courts must have such power right? Otherwise, murderers can go scot-free just by saying “no I don’t want to”. Businesses who violate laws and sanction can just walk away from their wrong doings just by saying “no I don’t want to”. I guess that is why there is this thing known as “contempt of court”.
But what do I know? I only studied a few modules on business law that’s all. I’m not a lawyer, I don’t have law degree nor pass the bar exam. That’s why I have been looking around and tried to understand what power the Delaware Court of Chancery have to enforce compliance. From what I have gathered there are 4. These are according to Robert Miller who is a law professor with extensive experience in mergers and acquisitions and related laws in Delaware Court of Chancery.
These power applies to all cases, meaning if Elon were to sue another company for similar cases, these help Elon too.
As the Twitter v Musk saga continues, there have been many opinions on the matter, and one of the most contested discussion is about whether the Delaware Court of Chancery have any power to force Musk to comply if he does not want to.
Using common sense, courts must have such power right? Otherwise, murderers can go scot-free just by saying “no I don’t want to”. Businesses who violate laws and sanction can just walk away from their wrong doings just by saying “no I don’t want to”. I guess that is why there is this thing known as “contempt of court”.
But what do I know? I only studied a few modules on business law that’s all. I’m not a lawyer, I don’t have law degree nor pass the bar exam. That’s why I have been looking around and tried to understand what power the Delaware Court of Chancery have to enforce compliance. From what I have gathered there are 4. These are according to Robert Miller who is a law professor with extensive experience in mergers and acquisitions and related laws in Delaware Court of Chancery.
These power applies to all cases, meaning if Elon were to sue another company for similar cases, these help Elon too.
1. “Special Master” can be appointed to “replace” Musk and complete the deal
A “Special Master” is a person who has the power to sign documents and hand over property on behalf of an individual or entity that is refusing to comply with court orders. Which means whatever this “Special Master” does, within the scope of the case, is treated as though Elon Musk did it.
A “Special Master” is a person who has the power to sign documents and hand over property on behalf of an individual or entity that is refusing to comply with court orders. Which means whatever this “Special Master” does, within the scope of the case, is treated as though Elon Musk did it.
2. Take over Musk’s Tesla shares and use that as payment to Twitter
The court can also take control of Musk’s Tesla shares and use it to either acquire Twitter for $44b, or pay Twitter billions of dollars in damages. As both Tesla and Twitter are incorporated in Delaware, the court can treat Tesla’s shares as property and thus seized it and give it to Twitter.
This case won’t be good for Tesla investors because this could cause a selling pressure if Twitter gets the shares and start dumping them, or if the market fears that Twitter will dump the shares.
The court can also take control of Musk’s Tesla shares and use it to either acquire Twitter for $44b, or pay Twitter billions of dollars in damages. As both Tesla and Twitter are incorporated in Delaware, the court can treat Tesla’s shares as property and thus seized it and give it to Twitter.
This case won’t be good for Tesla investors because this could cause a selling pressure if Twitter gets the shares and start dumping them, or if the market fears that Twitter will dump the shares.
3. Fine Musk $millions per day until Musk complies with the request
The court can also issue a daily fine on Musk until he complies with the court order. Just last year, TransPerfect was fined $30k per day until it complied with the court’s order.Miller thinks that if it is for Elon Musk, the daily fine can be up to tens of millions of dollar daily.
Since most of Musk’s assets are in Tesla shares and he said he had to sell Tesla shares to pay his taxes before, then he might have to do the same to pay the fines.
The court can also issue a daily fine on Musk until he complies with the court order. Just last year, TransPerfect was fined $30k per day until it complied with the court’s order.Miller thinks that if it is for Elon Musk, the daily fine can be up to tens of millions of dollar daily.
Since most of Musk’s assets are in Tesla shares and he said he had to sell Tesla shares to pay his taxes before, then he might have to do the same to pay the fines.
4. As a last resort, send Musk to jail
If Musk repeatedly refuses to comply with the court order, the court can hold him in contempt of court which will land him in jail. However, given point 1 to 3, I highly doubt this will happen. Unless he starts tweeting some crazy stuff that could be seen as in contempt of court, then that is another story.
If Musk repeatedly refuses to comply with the court order, the court can hold him in contempt of court which will land him in jail. However, given point 1 to 3, I highly doubt this will happen. Unless he starts tweeting some crazy stuff that could be seen as in contempt of court, then that is another story.
Conclusion
The Delaware Court of Chancery seems to have a lot of power and tools to “force” people (not just Elon, but everyone) to comply to the law. This is fair as no one will want to live in the world where the law does not work on the rich and powerful![]()
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However, regardless of what power the court has, the most important part is for the judge to first determine if Elon have the rights to back out of the deal or if he have to close the deal regardless. If the ruling is in favour of Twitter, I’m sure Musk will file for an appeal which could drag the case longer, but it won’t be years as the Delaware Court of Chancery is renown for closing complex M&A cases in a few months.
October 2022 will be exciting![]()
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!!
$SPDR S&P 500 ETF (SPY.US)$ $Invesco QQQ Trust (QQQ.US)$ $ProShares UltraPro Short QQQ ETF (SQQQ.US)$ $CBOE Volatility S&P 500 Index (.VIX.US)$
The Delaware Court of Chancery seems to have a lot of power and tools to “force” people (not just Elon, but everyone) to comply to the law. This is fair as no one will want to live in the world where the law does not work on the rich and powerful
However, regardless of what power the court has, the most important part is for the judge to first determine if Elon have the rights to back out of the deal or if he have to close the deal regardless. If the ruling is in favour of Twitter, I’m sure Musk will file for an appeal which could drag the case longer, but it won’t be years as the Delaware Court of Chancery is renown for closing complex M&A cases in a few months.
October 2022 will be exciting
$SPDR S&P 500 ETF (SPY.US)$ $Invesco QQQ Trust (QQQ.US)$ $ProShares UltraPro Short QQQ ETF (SQQQ.US)$ $CBOE Volatility S&P 500 Index (.VIX.US)$
Sources
https://www.businessinsider.com/elon-musk-could-lose-tesla-stock-go-prison-over-twitter-2022-7
https://www.ndtv.com/world-news/elon-musk-elon-musk-twitter-deal-elon-musk-news-jail-a-huge-fine-in-twitter-vs-elon-musk-what-court-can-do-3168652
https://variety.com/2022/digital/news/twitter-musk-court-trial-date-1235319829/
https://www.businessinsider.com/elon-musk-could-lose-tesla-stock-go-prison-over-twitter-2022-7
https://www.ndtv.com/world-news/elon-musk-elon-musk-twitter-deal-elon-musk-news-jail-a-huge-fine-in-twitter-vs-elon-musk-what-court-can-do-3168652
https://variety.com/2022/digital/news/twitter-musk-court-trial-date-1235319829/
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noobmaster69420 : lmao how many tesla u short?
TeslaSmurf : 1) The “master” can scratch his underparts and do nothing if the bank does not lend him the money.
2) The judge can THEORETICALLY take Elon’s properties for the correspondent amount of his stake in the play, being there other subjects involved, so for a maximum amount of about 10 billion. Elon has about 3 billion in Twitter shares and about 10-12 billions in liquidity: more than enough, no need to take Tesla shares.
3) about the fine, Elon has all the right to appeal it BEFORE paying: that takes many other months
4) The judge may even sentence Elon to prison, but he has to catch him in Delaware… You can live PERFECTLY well and healthy without going to Delaware..
FIVE: you keep assuming that Elon can’t possibly proof that he was in his contractual right to do what he INTENDS to do (the contract says 24 of October PLUS 6 months he may well take).
doctorpot1 OP noobmaster69420 : no position. Just sharing facts so every investors is aware of it. like I said it applies to everyone. today is Twitter v Musk tmr might be Tesla v someone else
doctorpot1 OP TeslaSmurf : LOL at 4. please show source evidence that that is the case where someone who is sentence to prison can just go to another state in US and live happily ever after. From what I know even if you go to another country, extradition can still happen as it is an international law.
For 1, the master can use his Telsa shares not just cash, as mentioned by Miller the law professor.
For 2, you contradict yourself in point 1 where you said Elon has no money but now you say he has. so does he or does he not? but regardless if he have cash or not the special master can use both.
For 4 and down, I guess you didn't read the whole article as you said I assume he will lose and he cant appeal, but kn the conclusion this is what I said "However, regardless of what power the court has, the most important part is for the judge to first determine if Elon have the rights to back out of the deal or if he have to close the deal regardless. If the ruling is in favour of Twitter, I’m sure Musk will file for an appeal which could drag the case longer, but it won’t be years as the Delaware Court of Chancery is renown for closing complex M&A cases in a few months."
Plus like I said, these are just some notes taken from legal experts, sharing it to improve our knowledge of how the world is REALLY like.
TeslaSmurf doctorpot1 OP : The “master” can manage the process, but CANNOT take Elon’s (or the bank’s) money and just use them. For that, a separate, long, different and in another state process would be needed: YEARS, not months.
Same for the jail sentence.
Your error is believing that whatsoever court can solve such a mess in three months: it won’t, even with a very hard sentence (which I don’t see, if AT ALL). The consequence, while Tesla’s results shining in Q3 and especially Q4, is that TWTR will crash and, sooner or later, it will be overtaken by Elon… at 42$.
doctorpot1 OP TeslaSmurf : like I said in the post. it is not said by me but by a LAW PROFESSOR which I heed advise from. Link here:
https://www.businessinsider.com/elon-musk-could-lose-tesla-stock-go-prison-over-twitter-2022-7
furthermore, here are some more details I found about special master: "Special masters have been controversial in some cases, and are cited by critics as an example of judicial overreach. For example, special masters have at times ordered the expenditure of funds over and above the amount appropriated by a legislative body for the remediation of the situation being examined. Their powers have generally been found to be valid and their remedies upheld by US courts."
https://en.m.wikipedia.org/wiki/Special_master
Seems like sometimes they might go a bit too far in their power.
doctorpot1 OP TeslaSmurf : and in regard to the timeline, it is not my view that it will close in month. The judge said it herself and I quote “Suffice it to say, in my view, the defendants underestimate the ability of this court … to quickly process complex litigation,”.
https://delawarelive.com/delaware-judge-twitter-elon-musk-trial/