Daniel Newman, the principal analyst at Futurum Research and CEO of Broadsuite Media Group, joined Cheddar News to discuss the judge's recent decision in the Twitter lawsuit against Elon Musk that denied Musk's request for a trial delay. “The real question is, should Musk have to buy a company if there were inaccurate disclosures, and that brings the whistleblower's situation into you know, the fold," he said. "And I think the whistleblower had real material information that needs to be considered."

Opening Bell

Whistleblower Could Add 'Real Material Information' in Twitter Lawsuit Against Elon Musk

here to discuss is Daniel Newman, principal analyst for future um research Daniel kind of some breaking news there. What do you, what do you make of the court's decision and the hearing today on Tuesday? Yeah, anything with the legal band brings a lot of complications and not a lawyer here, but I think this is definitely becoming a bit of a court of popular opinion. We're seeing how this is playing out in the media were listening and watching. There's two schools here. There's a, there's a school that tends to be very musk loyal and would like to see him win even though originally all of them wanted him to win and end up buying twitter because he's going to make twitter better and now they want him to win and not by twitter. And it's kind of interesting on the other side because now you have all the people that didn't want him anywhere near twitter to be forced to buy twitter and then he'll end up running twitter. So not to sort of punch back, but it's been an interesting pivot here as the popular opinion of the world has started to actually create a situation in which they're going to get what they didn't originally want. But in terms of the legal precedent that this is going to be decided on case law, hopefully it's going to be decided based on fact and there's a lot going on here. And the real question is, should must have to buy a company if there were inaccurate disclosures and that brings the whistleblowers situation into, into, into, you know, the fold and I think the whistleblower had real material information that needs to be considered. I love the way you paid the irony here of what Elon musk want at the beginning, what Twitter wanted to in the beginning and now they both want the opposite of that and they're fighting for the opposite that that cannot get lost on any of us in terms of Tuesday's court hearing and what both parties are looking for at this point, can you break down exactly what they're looking for and how that perhaps has shifted even in the last couple of weeks if it has. Yeah, it's pretty straightforward again, you know, the one party being musk says, you know, the whistleblower had material complaints and we want to amend the suit so we can incorporate those complaints into our suit and into our allegations that twitter may have misled or committed some type of fraud in their disclosures. And so the uh the information from whistleblowers, Zach, oh, they feel is material. And then of course, twitter saying we didn't do anything wrong, it shouldn't be incorporated. And this doesn't really have anything to do with the case about spam and buck counts. So the two are basically, you know, at odds on this and of course getting the case amended or getting the complaint amended is going to be an advantage to musk in terms of seeking out because I do think there are some details because his, you know, Zachary's claims basically talked about failures to protect account, which it's a little bit less specific about spam, but it did say the company misled about problems with, with spam. The whole D. M. Au was kind of a created number that changed the denominator and now says sure we have only 5% box if you don't count all of our total accounts. And so it kind of becomes a question mark. And then of course how much information was protected from the board? It sounds like Zach oh was kind of shut down at the executive level and the information and his concerns weren't getting to the board. On the other hand, you know, whistleblowers are handsomely paid. It's gonna create a lot of contention of whether or not he's doing this in the best interest. And then of course his complaints weren't all favorable to musk. I mean some of it was just him saying, hey, this company could have done more to protect. It isn't doing its best and it's not fully telling its its story to the market, which I think that's kind of the in the end what musk is saying as well. It's so fascinating to follow. Kind of a bit of the details here and even some of the language that's coming out of this case so far right. We know that twitter's lawyers are portraying Zach. Oh essentially as disgruntled employees saying that he has had an ax to grind with twitter and that he quote, you know, was not in charge of a spam at twitter. We've also even had, you know, people come on our show over the last couple of weeks since this has broken down, who know, you know, Zach oh, personally know his kind of credibility, his long, um, you know, career in this space and fighting against, you know what he sees as security concerns. Um, you know, in, in the cyberspace, then you've got twitter's lawyers, you know, saying that that musk has been looking to, to kind of get out this deal for months. This really has nothing to do with the bots, certainly nothing to do with Zach. Oh, during the hearing, lawyers quoted a text message from May that must send to his bankers at morgan Stanley saying, let's slow this down, just a few days, it won't make sense to buy twitter. If we're headed into World War three, how can musk lawyers kind of benefit from, from delaying the deal, you know, moving forward or benefit because that now that's new at this point, benefit from Zach oh's testimony? Yeah, well, first of all, I think we're conflating different things as an entrepreneur, someone that buys companies, I don't always look at a decision to buy a company based upon. One thing I think must could be concerned about spam and be concerned that we may be going into World War Three and maybe wanting to protect or slow down the Deal. So he could see what happened, you know, there's not a lot of context in that tweet and I think it's being somewhat, you know, it's being delivered as somewhat of a factual like this meant he didn't want to do that and I think it's it's normal to have multiple concerns at the same time when you're looking at buying a company for over $40 billion. Um so for him, the ability to sort of slow down and force twitter to make all those disclosures is an opportunity for him to potentially, as mentioned, you know, is he trying to renegotiate the deal? Is he trying to show factually that the company did in fact mislead investors in filings, he waved his diligence which of course created a certain amount of additional risk, but that diligence was way based upon the disclosures being accurate. So is he looking for more time to prove those to be inaccurate. And I think that's where the zack co whistleblower complaint becomes an opportunity for him to maybe create some doubt. But of course, like I said, going back to my beginning statement, it's incredibly interesting to me that everybody now wants him to forge ahead and have to buy it because this is what the people that now kind of saying musk is on the hook, musk wanted to re price the deal musk was trying to reach the contract must now they're saying we really wanted to buy it. Maybe they just want to see him pay. But in the end, like I said, I can't, I can't really get away from that irony which seems to be really rising to the top and all of the articles and news and coverage I've been reading. I just think people enjoy the Elon musk roller coaster at this point. There are on it, they're gonna write it if it goes up, it goes up. If it goes down it goes down. And that's based on Ellen must swim at this point. To a certain extent what he wants to date can be very different from what he wants tomorrow and people just jump on that bandwagon before I ever let you go here, let's let's wrap this in a bow and give me your guestimation, your ideas in terms of, you know, whether you think must can truly kind of get out this deal without paying any penalty moving forward based on the way the judge uh, McCormick reacted yesterday. I do have my concerns. Delaware tends to be very protective of corporations and it seems that she was definitely indicating a little bit of favoritism towards the twitter side. Again, I'm not a lawyer. So I'm giving you just based upon what I'm reading what I've, what I've seen and what I've heard um, having said that, I think whether this, this complaint is able to be amended and then of course whether they can show that this is enough to indicate that there was misleading um, filings that must became material after the deal. That's probably the one way out in the end though. I think there's a very high probability must end up paying something. But the question I think all of us should be asking is does he still want the company? Because if he still wants twitter perhaps at a lower price, there may be a negotiation to be had. But it feels like he doesn't want it at all anymore in the market and the way the market is sort of pricing the stock and the way the options are, there's continued doubt right Of whether or not we'll ever get to that 44 billion, let alone whether must will ever buy the company at all. And the profitability of the company probably won't be impacted all that much because Musk didn't ever really say here's the plan to make more money and grow the company. He just wanted it to be a more accurate news source which didn't promise growth in anyway. So I'm not sure that's really the deal either. At this point it's a continued kind of wait and see game wait and see if Elon musk is forced to buy it pays a penalty and then the next wait and see what happens with with twitter more long term daniel, really appreciate your time and your insight, Daniel Newman principal analyst at Future research