How Elon Musk might turn around his desperate fight against Twitter

Elon Musk is angling to force Twitter to hand over a group of key employees for questioning — and the legal maneuver could be the mogul’s last and best hope in a desperate fight to scrap his $44 billion takeover deal. 

Twitter’s shares have rallied more than 20% over the past month to close at $44.26 on Friday, indicating Wall Street is increasingly confident Musk will be forced to take over Twitter at what now looks like a stratospheric price following a summer rout in tech shares. The surging share price has also reduced the possibility of haggling down Twitter’s price tag.

In the latest sign that Musk is preparing to pay up, the billionaire sold off $6.9 billion of Tesla shares earlier this month, which he admitted he did in “the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through.”  

But in a legal gambit that Musk’s team hopes could turn the tide, his lawyers on Tuesday accused Twitter of trying to hide which employees are responsible for evaluating spam accounts on the site — and asked Delaware Judge Kathaleen McCormick earlier on to force Twitter to identify them for questioning, a source close to the case told The Post. 

The source said that McCormick is expected to respond to the request this week. 

If she sides with Musk, she would hand the mogul a much-needed victory, University of Iowa corporate finance and law chair Robert Miller told The Post. 

Miller said the strategy may still be a longshot, but that interviewing the employees is Musk’s best chance of proving his argument that Twitter knew it had a problem with bots and chose to cover it up. If Musk is successful, Twitter’s actions would be interpreted by a court as fraud and allow Musk to walk away from the deal scot-free, Miller said. 

“Elon must show that not only is the fake account number false, but also they knew it was false,” Miller said. “If he wins on the fraud charge… the merger contract would no longer apply.” 

Miller said McCormick is likely to grant Musk’s request because not doing so could increase the odds her decision — if she rules against Musk — would get overturned on appeal. 

But J.B. Heaton, an investment researcher and ex-corporate attorney, sees things differently. He told The Post that Musk’s push to interview Twitter employees amounts to a “fishing expedition” — and that the mogul’s single-minded focus on bots has turned his case into a “slow motion trainwreck.” 

“They’re doubling down on a bad strategy,” Heaton said. “He got in, he got cold feet and he decided, ‘I’m going to try to use bots as my issue.’ No one’s buying it.” 

Instead of making the “colossal error” of spending their time arguing that Musk should be allowed to terminate the contract due to his concerns about bots, the mogul’s lawyers should accept that the Delaware Court of Chancery is almost inevitably going to rule against him and focus on minimizing the damage, Heaton said. 

They would accomplish this by focusing on a provision in the contract that caps any termination fee at $1 billion — a drop in the bucket compared to the $44 billion deal that Twitter wants the court to enforce. According to Heaton, Musk’s lawyers should argue that Musk should pay the fee and that forcing him to buy the company — a measure known as specific performance — would “turn contract law on its head,” Heaton argued. 

While that might be a more convincing argument in the eyes of Judge McCormick and Delaware’s supreme court, it would also require Musk’s lawyers to confront the billionaire who signs their checks and tell him that his main argument is a stinker. 

“Litigation is a hotbed of excessive optimism,” Heaton said, adding that there would be a “very good argument” to give up on trying to beat Twitter outright and instead focus on controlling the damage.

Miller, however, sees that argument as a nonstarter. He said that Musk should focus on arguing the bots issue because if Delaware rules against Musk, it is almost sure to order him to buy the company through specific performance.

That possibility makes Musk’s recent stock sales “very rational,” Miller said. 

“Elon selling stock tells me he plans to comply with the court order if he loses,” he said.