Twitter Sues to Force Musk to Consummate $44 Billion Buyout
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Twitter Inc. sued billionaire Tesla CEO Elon Musk over his abandoned $44 billion takeover bid, asking a judge to force him to follow through on his offer.
Lawyers for Twitter told a Delaware judge that the world’s richest man failed to honor his agreement to pay $54.20 a share for the San Francisco-based social-media platform. Musk abandoned the deal July 8, citing in part concerns about the number of fake accounts among users.
Twitter Chairman Bret Taylor said last week that the company planned to pursue legal action against Musk, and in a letter released July 11, its lawyers called the deal termination “invalid and wrongful.” The filing sets up what will be a closely watched court battle between Musk and Twitter, a communications tool that the billionaire favors but where his missives have previously gotten him in legal trouble.
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 in its lawsuit
“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 said in the lawsuit.
Musk backed out of the deal to buy the platform on July 8, saying in a regulatory filing that the company has made “misleading representations” over the number of so-called spam bots on the service. Twitter hasn’t “complied with its contractual obligations” to provide information about how to assess how prevalent the bots are on the social medial service, Musk said in a letter to Twitter that was included in the regulatory filing.
Musk also argued that Twitter has failed to operate its normal course of business. The company instituted a hiring freeze, fired senior leaders and saw other major departures. “The company has not received parent’s consent for changes in the conduct of its business, including for the specific changes listed above,” Musk said in the letter, calling it a “material breach” of the merger agreement.
“Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” Twitter said in the suit.
Twitter shares lost 12% of their value in the first trading day after Musk announced he was walking away. The stock is down 21% from the start of the year, trading at $34.04 at the close July 12.
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Musk’s deal with Twitter had included a provision that if it fell apart, the party breaking the agreement would pay a termination fee of $1 billion, under certain circumstances. Legal experts have debated whether the conflict over spam bots is enough to allow Musk to walk away from the deal.
But the merger agreement also includes a specific performance provision that allows Twitter to force Musk to consummate the deal. Twitter must prove it didn’t violate the buyout agreement’s terms and that Musk breached the pact by pulling out. The company hired merger law heavyweight Wachtell, Lipton, Rosen & Katz to represent it in the fight.
“This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business,” the lawsuit said. “Twitter brings this action to enjoin Musk from further breaches, to compel Musk to fulfill his legal obligations, and to compel consummation of the merger upon satisfaction of the few outstanding conditions.”
Twitter told staff in a memo that it has asked for the case to be heard on an expedited basis, in September.