This analysis was first published in SvD Näringsliv, in Swedish, on October 5th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.
A court founded in 1792 appears to have done something remarkable: made Elon Musk back down. And this before the trial had even begun. It now looks like he will become the owner of Twitter after all.
This sleepy little state, tucked just south of Pennsylvania and New Jersey, has found itself an involuntary centrepiece in the drawn-out battle between billionaire Elon Musk and social media giant Twitter.
In less than two weeks, a trial in Delaware was due to begin. It would determine whether Elon Musk was obliged to go through with the agreement he had signed to acquire Twitter for around $44 billion. In short: Musk appeared to have had second thoughts and wanted out. Twitter wanted him to go through with it. The court would have the final say.
It now looks like there will be no trial — though the very last word has not been spoken yet. Yesterday, Elon Musk’s lawyers sent a letter proposing that the original contract be upheld as intended, on the condition that the trial is put on hold indefinitely. In other words: the legal odds of Musk winning appear to have been rather slim.
Musk is used to getting his way, and has never been afraid of controversy — in his personal life or in business. Tesla, of which he is CEO, bought his cousin’s company SolarCity for billions despite widespread criticism. And just days ago, he proposed a peace plan for Russia and Ukraine that was met with both fury and mockery.
In the Twitter case, however, his real opponent was not so much the social media company itself as a state’s entire identity.
Delaware is, in a word, extraordinarily business-friendly. Its population is just over one million. Its registered companies number 1.8 million. In 2021, 93 percent of all IPOs came from companies incorporated there.
Most of those companies have no actual operations in the state — making it, in effect, a kind of American tax haven. Certain fees and taxes must still be paid to take advantage of these benefits. This is lucrative for Delaware, and has become a cornerstone of how the state earns its money.
Central to all of this is that everyone feels comfortable doing business with Delaware-incorporated companies. And this is where the court — the Delaware Court of Chancery, founded in 1792 — comes in. It is one of just three states with a court of this kind, and it differs from others in its more flexible approach to disputes in areas where there is no precise legislation. Corporate matters fall squarely in that category.
Twitter’s argument was straightforward: Musk signed a contract to buy the company. He had to honour it. This brought a fundamental question into the frame — one the Delaware court might be called upon to resolve. Are signed contracts no longer binding? Uncertainty over something this basic could prove fatal to business confidence. Previous cases in the same court have compelled companies to complete deals they tried to walk away from.
Musk’s argument was that the volume of spam and fake accounts was large enough to damage the company, and that he should therefore not be required to complete the deal. But even on that point, the court has precedents around what constitutes “material harm” — how significant the damage must be to matter legally. That threshold is very high: around a 40–50 percent drop in revenue. Musk’s alleged bot problem would not have reached that bar, even if his numbers were right.
It now appears that Musk is being forced to close his multibillion-dollar Twitter deal after all. His legal advisors presumably looked at the full picture and concluded they were likely to lose — if for no other reason than this: Delaware cannot afford to introduce uncertainty into business contracts. The entire state runs on simplicity, clarity, and the fees that come with them.
Elon Musk is stubborn, innovative, and has achieved many apparently impossible things — mass-producing electric cars, building reusable rockets. Funny, then, that it took a court from the eighteenth century to make him give in this time.
