Since we've been talking in this space about the Twitter/Musk deal today, I wanted to flag an interesting development on that front for you.

First, credit where it's due: I wouldn't have heard about this if it wasn't for the very good Opening Arguments podcast. If you're a layperson with any interest in the law at all, you should be listening to Opening Arguments. openargs.com/

So... (🧵​)

The Orlando Police Pension Fund holds, among other things, some Twitter stock.

They filed a lawsuit on May 6 in Delaware Chancery Court that includes among its defendants both Twitter and Elon Musk.

You can read the entire complaint here: documentcloud.org/documents/21

If you are the kind of nerd who finds arcane points of law interesting, you are going to LOVE this complaint. Because it is wielding a real Buster Sword of legal arcana.

Let's start at the beginning. The suit was filed in Delaware because Twitter, like many corporations, is incorporated in Delaware. Businesses like to incorporate in Delaware, because the state has exceptionally business-friendly laws. It also has the Delaware Court of Chancery, an unusual kind of high court that focuses on handling corporate disputes. courts.delaware.gov/Chancery/

Now, if you incorporate your business in Delaware, that means it has to follow Delaware's corporation laws. Which, as previously noted, are quite generous and friendly to corporations.

The Orlando Police Pension Fund alleges that Elon Musk, as a shareholder of Twitter, broke one of those laws; and that Twitter, by agreeing to the deal Musk broke that law to put together, broke another one.

You and I can have the opinion that Elon Musk and Twitter broke a law and it means nothing, of course. But we're not Twitter shareholders. The Orlando Police Pension Fund IS a Twitter shareholder, which gives them "standing" to file suit against Twitter in the Court of Chancery. en.wikipedia.org/wiki/Standing

The laws Musk and Twitter are alleged to have broken are found in Section 203 of the Delaware Corporation Code: codes.findlaw.com/de/title-8-c

This section says that, outside of some exceptions, "a corporation shall not engage in any business combination with any interested stockholder for a period of 3 years following the time that such stockholder became an interested stockholder."

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@jalefkowit What does it mean to "engage in a business combination"?

@loke It's defined in Section 203 as well -- full text is here: codes.findlaw.com/de/title-8-c

The part we care about is probably paragraph (ii), which says it includes "[a]ny sale, lease, exchange, mortgage, pledge, transfer or other disposition (in 1 transaction or a series of transactions), except proportionately as a stockholder of such corporation, to or with the interested stockholder."

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