Twitter’s stock surged nearly 9% on Wednesday morning as investors gave the company increasingly strong odds in its legal battle with Elon Musk.
Shares of the embattled social media site were trading around $37.06 midday on Wednesday, up 8.8% from $34.06 when markets closed on Tuesday.
The surge comes after Twitter sued Elon Musk in Delaware court on Tuesday in an attempt to force the Tesla CEO to complete his deal to buy Twitter for $44 billion, or $54.20 per share.
The mogul has argued that he’s allowed to walk away from the deal because Twitter breached its contract obligations by failing to turn over adequate data about bots, while Twitter has accused Musk of trying to “trash the company, disrupt its operations, destroy stockholder value, and walk away.”
CNBC’s Jim Cramer wrote on Twitter Wednesday that Twitter’s suit was “devastating in detail about how horrendous and infantile Musk was” during his dealings with the company.
Cramer added that he believes that Delaware’s Court of Chancery “will do its best” to force Musk to buy the company.
Despite Wednesday’s boost, Twitter shares remain nearly 33% below the deal’s closing price of $54.20 per share. That indicates Wall Street believes a settlement or renegotiated sale could be in the cards rather than a full-on court order forcing Musk to buy Twitter, according to Wedbush Securities managing director Dan Ives.
“The stock is now factoring in some significant chance that Musk will ultimately have to pay Twitter a settlement well north of $1 billion and in a possible scenario ultimately still have to buy the company at the agreed upon price at $54.20,” Ives said in an investor note Wednesday.
In another show of confidence in Twitter’s legal chances, investment firm Hindenburg Research said Wednesday that the company’s lawsuit “poses a credible threat to Musk’s empire” and announced that it had accumulated a long position in Twitter stock.
Twitter’s 241-page complaint filed in the Delaware Court of Chancery slams Musk for a “long list of material contractual breaches.” It includes many screenshots of Musk’s tweets criticizing Twitter, including one in which Musk responded to CEO Parag Agrawal with a poop emoji.
Twitter also accused Musk in the suit of “using bad-faith pursuit of spam-related evidence to assert a baseless claim of breach [of contract].” The company said he made “increasingly irrelevant, unsupportable, and voluminous information requests” in an apparent attempt to sink the deal.
Lawyers for Twitter also argued that Musk is looking to get out of the deal because Tesla stock is down 40% so far this year, reducing Musk’s net worth by tens of billions of dollars.”
“Musk wants out,” Twitter said. “Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders.
Twitter is requesting a four-day trial starting in September — an unusually short trial time that appears to indicate the company’s confidence in its case.