shareholders are poised to approve the $44 billion takeover that
is now trying to exit, according to people familiar with the matter, putting the deal’s fate in a Delaware judge’s hands as the social-media company tries to force the billionaire to follow through with the purchase in court.
Early votes show investors approving the deal by a wide margin, the people said, though there is always a chance that the results could change as shareholders can alter their votes through a meeting scheduled for Tuesday at 1 p.m. Eastern time.
Mr. Musk, the company’s largest shareholder with a roughly 10% stake, hadn’t voted his shares one way or another as of Monday afternoon and was unlikely to given that he has alleged that Twitter breached the merger agreement, some of the people said. The agreement requires Mr. Musk to vote his shares in favor of the deal, though his support isn’t crucial if enough other investors back it.
Other big Twitter shareholders, including index-fund managers who together control roughly 20% of Twitter’s stock, are poised to support the deal, some of the people said.
Mr. Musk agreed in April to pay $54.20 a share for Twitter. The social-media company’s shares have been trading well below that since he tweeted in May that the deal was “on hold,” a prelude to his later move to back out of it. That means many shareholders stand to gain handsomely if the deal closes on its original terms. The stock closed Monday at $41.41.
Analysts expect Twitter’s shares to drop significantly if Mr. Musk finds a way to walk away without paying a hefty fee.
In July, Mr. Musk unveiled a plan to bail out on the deal over claims Twitter misrepresented the number of spam accounts on its platform. Twitter then sued him to follow through, arguing that Mr. Musk had a change of heart as the market soured and is still under obligation to complete the deal. The two sides are set to face off in the Delaware Court of Chancery beginning Oct. 17.
While legal experts have so far tended to view Twitter’s case as stronger, there remain significant questions. They include whether a recent whistleblower complaint about Twitter could bolster Mr. Musk’s case and whether a judge would force a reluctant buyer to follow through with such a large deal, especially for a company with Twitter’s significance to society. The so-called specific-performance remedy that Twitter is seeking hasn’t been tested on such a scale.
Twitter’s former head of security,
filed a whistleblower complaint against the company in July, alleging it failed to protect sensitive user data and lied about its security problems. Twitter has said his complaint “is riddled with inconsistencies and inaccuracies and lacks important context.”
Mr. Musk last week received permission to incorporate the whistleblower’s allegations into his countersuit and filed an amended complaint that is under seal for now.
Mr. Zatko is set to testify before a U.S. Senate committee about his concerns Tuesday, the same day Twitter shareholders will finish casting their votes on the deal.
Write to Cara Lombardo at [email protected]
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Appeared in the September 13, 2022, print edition as ‘Twitter Deal Set to Win Vote.’