The rapid growth of social media over the past two decades has presented firms with a significant challenge: Users of social media can share and disseminate damaging information with potentially adverse consequences. Prominent examples that went viral include accounts of racist and sexist treatment of employees at Walmart, unsafe working conditions at Amazon, unfair pay practices at Chipotle, and environmental violations at Nestlé. As noted by social psychologist Takuya Sawaoka, “[t]he internet now allows […] thousands of people to participate in collective […] [monitoring], in a way that wasn’t possible before” (Meinch, 2021). These anecdotes suggest an important, yet unexplored, … Read more
As we get closer to the October 17th scheduled trial date for the Twitter lawsuit to compel Elon Musk to complete his proposed $44 billion acquisition of Twitter, the charges and allegations are getting wilder and woolier. Once, this was a case in which the party seeking to escape the merger agreement (i.e., Musk) asserted that the percentage of Twitter accounts that were “bots” (or fake) amounted to a “material adverse change” that permitted the buyer to back away. Given both Delaware’s strong commitment to deal certainty and Musk’s seemingly reckless indifference to due diligence, most law professors saw Musk … Read more
A remorseful acquirer wants to get out of a merger or acquisition agreement. It concocts a thin justification, which a court wisely rejects, finding unlawful breach. What is the appropriate remedy for harm done to the target?
While attention has focused on the controversy surrounding Elon Musk’s proposed acquisition of Twitter, this question arose in the recent Canadian decision of Cineplex v. Cineworld. The Cineplex court rejected specific performance and instead, in a case of first impression, awarded the target CAD $1.24 billion in expectation damages for loss of anticipated synergies.
Our forthcoming paper takes a close look … Read more
What a long, strange trip it’s been for Twitter shareholders since the company’s November 7, 2013 Initial Public Offering on the New York Stock Exchange.
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On July 19, 2022, in the Twitter v. Musk litigation, Chancellor Kathaleen McCormick presided over what was likely the most widely observed hearing on a motion to expedite in the Delaware Court of Chancery’s history. While deal bust-ups are front page fare for the financial press, the high profile of this case brought the Court of Chancery further into the national consciousness than usual (though who among us hasn’t asked “what is a chancery?”). On the day of the hearing, the public access telephone line was, indeed, “lit,” hitting its maximum capacity with merger arbs (and other interested … Read more
Every pundit and commentator has by now analyzed the ongoing battle between Elon Musk and Twitter over Musk’s attempt to walk away from their deal. Almost all of these evaluations have rated Twitter as having a considerably stronger case, because (among other reasons) Musk did no due diligence, was well aware of the “bot” (or fake user) problem, negotiated no contractual protections directly addressed to these risks, and generally behaved inequitably, disparaging Twitter and toying with the SEC’s rules. Okay, but that raises an interesting puzzle: If the facts favor Twitter, and if Musk’s offer was for $54.20 a share … Read more
What did business journalists do before the arrival of Elon Musk? In those by-gone days, their page in the newspaper was gray, dull, and strewn with statistics. Now, it is filled with a continuing soap opera, as exciting as the sports page because it has drama, intrigue, and high emotion. The trash-talking that one hears in the NBA playoffs pales in comparison with Musk’s daily name-calling.
Currently, it appears that Musk wants to re-negotiate his $54.20 share price for Twitter because he offered a price well over Twitter’s peak value in an overheated market. That market is no longer overheated … Read more
Let’s be clear about this: The Twitter board was under no legal compulsion to accept Elon Musk’s offer for the company and, from a corporate governance structural point of view, was in an unassailable position until the 2024 shareholders meeting. The single motivating factor in its decision, apparently, was that the deal was a good one for Twitter shareholders, without apparent regard for how Musk might run the company and the consequence for the social media infrastructure that Twitter had created, much less the public welfare. In my opinion, the board’s conduct was shockingly near-sighted, and the predictable adverse consequences … Read more
Social media is widely used to create, disseminate, and consume information. Today, around seven in 10 U.S. adults use social media. Additionally, more than half of Americans at least occasionally obtain news through social media. In financial markets, investors use social media to express their opinions, and companies use it to disseminate information. Financial regulatory agencies are also increasingly adopting social media to connect with financial market participants. The SEC, for example, frequently tweets about its actions and activities. Yet, we know very little about whether the SEC’s use of social media influences the behavior of entities … Read more
Public securities markets have undergone dramatic changes in recent years. Not only has the number of publicly traded firms been declining, but the nature of the firms that choose to go public has also changed. While publicly traded firms in the classic sense are thought of as widely-held with dispersed shareholders, many of the firms that have recently elected to go public are tightly controlled by their founders or other entities via a dual-class stock structure. Almost 30 percent of IPOs in 2017-2019 had dual-class structures, including Snap, Twitter, and Dropbox. Because dual-class structures shield managers from the discipline of … Read more
On December 15, 2020, Ireland’s Data Protection Commission (“DPC”) announced its decision to fine Twitter International Company (“Twitter”) €450,000 for failing to notify the DPC promptly of a data breach affecting EU personal data in compliance with the EU General Data Protection Regulation (“GDPR”). The decision received all the press coverage that is to be expected for any decision involving Big Tech and was the largest GDPR fine issued by the DPC to date. However, the significance of the decision really lies in the message that Controllers cannot escape their breach notification obligations due to failures on the part of … Read more
Can social media help firms improve communication with investors? In a recent paper, I argue that social media communication can give a firm an advantage over competitors in attracting attention to earnings announcements and lead to stronger price reaction to news announcements. This is because investors have limited resources for acquiring and processing to information, and social media makes it easy for them—and particularly retail investors—to learn about company results.
To test the hypothesis, I look at FTSE100 companies that are active users of social media. For example, 64 percent of FTSE 100 companies used Twitter to communicate with investors … Read more
Shareholders are organizing and mobilizing on new social media platforms like Twitter. This changes the dynamics of shareholder proxy contests to favor small shareholders over management. Disruptive technology may bring about a shareholder revolution, which may not be in all shareholders’ best interests, at least from the perspective of shareholder wealth maximization, and it also has powerful implications for the future of corporate social responsibility.
Twitter and other social media are platforms for global social interaction. A twitter user can send a “tweet,” which is a sort of 140-character text message, to the world. About 500 million tweets are sent … Read more
Yesterday, the Securities and Exchange Commission (SEC) directly addressed the application of Regulation Fair Disclosure (Regulation FD) to corporate use of social media outlets such as Facebook and Twitter. In a Report of Investigation—a format used by the SEC to issue general guidance based on a specific situation—the SEC expressly stated that Regulation FD applies to social media in the same manner as it does to company websites: Any of these communication channels can serve as effective, legal means of broadly disseminating material information to investors, if access to them is unrestricted and if the company has provided advance notice … Read more