Elon Musk’s Twitter – New Developments
As Elon Musk’s Twitter takeover was discussed in an earlier blog post, it seems appropriate to provide an update on the eventful acquisition. In early July 2022, Elon Musk filed to back out of the $44 billion deal. In a letter to the US Securities and Exchange Commission, Musk declared he would be terminating the merger agreement due to Twitter’s failure or refusal to provide information on the number of bots and spam accounts on Twitter. This blog post will discuss the lawsuit that Twitter filed in an attempt to enforce the acquisition.
Musk’s reasons for cancelling the agreeement
Musk has provided three reasons to explain the attempted termination of the acquisition. Musk claims that Twitter did not provide him with information related to spam accounts despite numerous attempts to obtain it. This data is crucial to Twitter’s performance, and Musk argues that he relied on a misleading representation of such numbers when he entered into the agreement. Further, Musk states that Twitter’s firing of many of its highest-ranking executives and a major part of the talent acquisition team was in breach of the platform’s
obligation to keep the business organization substantially intact.
Twitter’s multi-billion dollar lawsuit
Elon Musk’s claims were exhaustively rebutted in Twitter’s lawsuit against Musk. Twitter claims that Elon Musk tries to terminate the binding agreement due to it no longer serving his personal interests. The 62-page document accusing the billionaire rather compellingly concludes that:
“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.”
Twitter is accusing Musk of bad faith, inconsistency, unreasonable demands, and not taking the acquisition process seriously. Demanding specific performance, Twitter tries to finish the deal by getting Musk to buy the company as he promised. Twitter states that it has provided Musk with all the requested information and claims that the requests were designed to flank the deal. Twitter claims that Musk’s estimates for the number of spam accounts on the social media platform’s user base are wrong, and that the company had notified Musk’s lawyer of firing staff and received no objections. Further, Twitter claims that Musk breached the agreement; he had not shown reasonable effort to conclude the acquisition; withheld consent from decisions to the detriment of Twitter’s operations; and contrary to the agreement he had made disparaging tweets about Twitter.
In addition to the lawsuit against Musk that was filed by Twitter, Luigi Crispo, a Twitter shareholder, sued Musk in a case that seeks the status of a class action lawsuit. Crispo is asking the Court to order Musk to close the deal, as Musk is in breach of a fiduciary duty that he owes to Twitter’s shareholders. Furthermore, Crispo is asking the Court to award the shareholders damages for the losses caused by Musk’s actions.”
On the 29th of July, Musk filed a countersuit against Twitter. The 164-page document is confidential, though a public version of the claim is expected to be submitted soon. Kathaleen St. J. McCormick, the Chief Judge at the Chancery Court of Delaware, has ordered the trial to begin on the 17th of October 2022 and last for five days. The decision to have the trial in October was the first concession the Court made to Twitter, as Musk had requested for the trial to take place in February to allow him more time to investigate the status of the spam accounts. While Musk’s claim is yet to be analyzed, legal experts have already sided with Twitter, as its claim against Musk seems undoubtedly strong.