Twitter sued Tesla CEO Elon Musk on Tuesday, trying to force him to complete his $44 billion takeover of the social media company by accusing him of “outlandish” and “bad faith” actions that have caused the platform irreparable harm and “wreaked havoc” on its stock price.
Back in April, Musk pledged to pay $54.20 a share for Twitter, which agreed to those terms after reversing its initial opposition to the deal. But the two sides have been bracing for a legal fight since the billionaire said Friday that he was backing away from his agreement to buy the company.
Twitter’s lawsuit opens with a sharply-worded accusation: “Musk refuses to honour his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.”
“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 suit stated.
Twitter filed its lawsuit in the Delaware Court of Chancery, which frequently handles business disputes among the many corporations, including Twitter, that are incorporated there.
As part of the April deal, Musk and Twitter had agreed to pay each other a $1 billion breakup fee if either was responsible for the deal falling through. The company could have pushed Musk to pay the hefty fee but is going farther than that, trying to force him to complete the full $44 billion purchase approved by the company’s board.
“Oh the irony lol,” Musk tweeted after Twitter filed the lawsuit, without explanation.
The arguments and evidence laid out by Twitter are compelling and likely to get a receptive ear in the Delaware court, which doesn’t look kindly on sophisticated buyers with highly-paid legal advisers backing off of deals, said Brian Quinn, a law professor at Boston College.
“They make a very strong argument that this is just buyer’s remorse,” Quinn said. “You have to eat your mistakes in the Delaware Chancery Court. That’s going to work very favorably for Twitter.”
Musk alleged Friday that Twitter has failed to provide enough information about the number of fake accounts on its service. Twitter said last month that it was making available to Musk a ″fire hose” of raw data on hundreds of millions of daily tweets.
The company has said for years in regulatory filings that it believes about 5 per cent of the accounts on the platform are fake. Musk is also alleging that Twitter broke the acquisition agreement when it fired two top managers and laid off a third of its talent-acquisition team.
Twitter’s suit repeatedly emphasises Musk’s contemplation of starting a Twitter competitor – an alternative option he sometimes aired publicly and sometimes privately to Twitter’s executives and board members. While the company has said it co-operated in providing the data he requested on fake “spam bot” accounts, the lawsuit suggests Twitter was concerned that disclosing too much “highly sensitive information” could expose the company to competitive harm if shared.
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