Twitter sues Elon Musk after attempt to terminate purchase
Twitter on Tuesday sued Elon Musk to force the Tesla CEO to complete his $44 billion acquisition of the social media platform.
Musk on Friday said he was terminating the agreement because Twitter hadn’t given him enough information about bots on the platform.
A judge in the business-specialized Delaware Court of Chancery will now determine whether his reasons for exiting the binding contract are legitimate.
If not, Musk could be compelled to complete the purchase at the price point he offered in April of $54.20 per share.
“Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he— unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” the lawsuit says.
Musk’s team made three arguments for why it believes the agreement has been violated: that Twitter did not share sufficient information about bots, that Twitter’s statements about bots are wrong and the truth lowers the company’s value, and that Twitter broke an agreement by terminating two executives.
“These claims are pretexts and lack any merit,” the lawsuit filed Tuesday argues. “Musk, by contrast, has been acting against this deal since the market started turning, and has breached the merger agreement repeatedly in the process.”
The lawsuit alleges that Musk’s arguments using bots to justify terminating the deal are “a model of hypocrisy.”
“One of the chief reasons Musk cited on March 31, 2022 for wanting to buy Twitter was to rid it of the ‘[c]rypto spam’ he viewed as a ‘major blight on the user experience,'” it reads. “But when the market declined and the fixed-price deal became less attractive, Musk shifted his narrative, suddenly demanding ‘verification’ that spam was not a serious problem on Twitter’s platform, and claiming a burning need to conduct ‘diligence’ he had expressly forsworn.”
Twitter also alleges in the suit that Musk has violated the agreement several times by, among other things, publicly slamming the company and its staff.
The legal battle over Musk’s agreement to purchase all outstanding shares of Twitter and take the company private promises to be a lengthy one.
The case could take months to resolve, according to legal experts. While that is faster than cases of this magnitude tend to take in other courts, it could still be a damaging period for Twitter’s business interests moving forward.
Musk is unlikely to be able to exit the deal fully unscathed, but there are several potential scenarios where the payout on his end ends up being less than the $44 billion initially promised.
Both parties at any point could agree to jointly terminate the agreement and renegotiate a different price. A settlement could also be reached in which Musk pays Twitter some damages, potentially in ten digits, but does not go through with the purchase.
Updated at 5:39 p.m.