Twitter filed a lawsuit against Elon Musk on Tuesday to force him to finish his $44 billion takeover of the company. This sets up a long court battle over the future of the social media service.
Musk agreed in April to buy Twitter, but last week he said he would back out of the deal. Twitter took Musk to Delaware Chancery Court to make him stick to the deal to buy Twitter. The court will decide if he still has to pay for the purchase or if Twitter broke its promise to give Musk the data he asked for, which would let him get out of it.
In the lawsuit, the company said that Musk refuses to do what he agreed to do for Twitter and its investors because the deal he made no longer serves his own interests. “Musk seems to think that, unlike everyone else who is subject to Delaware contract law, he has the right to change his mind, trash the firm, disrupt its operations, destroy shareholder value, and walk away.”
The argument revolves around the question of who should know what. Musk ended the deal because Twitter wouldn’t tell him about spam bots, which are often called fake accounts, on the network. He always said that he didn’t believe the company when it said that about 5% of its active users are robots. He said that Twitter lied to the public on purpose and stopped him from getting more information about how it handled the data. Musk has also said that Twitter did not give enough notice before getting rid of two top executives.
Musk, on the other hand, made a deal with Twitter that is legally binding. As part of the contract, Twitter added a special performance clause that gives it the right to go to court to force the sale to go through as long as the billionaire still owes money.
In a letter sent to Musk’s lawyers on Sunday, Twitter’s lawyers said that Musk’s decision to cancel the deal was “invalid and unfair” and that he “knowingly, intentionally, willingly, and grossly broke” his agreement to buy the company. The company has said that it is sure of its spam account statistics and that it uses spam experts to check the count and make sure it is right.
Twitter said in its lawsuit that Musk, who also runs the car company Tesla, wanted out of the deal because changes in the stock market had hurt his wealth. (In the past few months, Tesla’s stock price has gone down.) Twitter said that the billionaire used his worries about bots as a way out of the deal.
According to the complaint, Musk broke a promise not to criticize Twitter officials in public and “secretly gave up” on trying to get a loan to pay for the purchase. The social media company says that by doing this, he broke his promise to use “reasonable best efforts” to close the deal.
The business said, “Musk wanted to run away.” “But the merger deal gave him little room to move.”
Musk did not answer a request for a comment.
In an email to staff on Tuesday, Twitter’s general counsel, Sean Edgett, said that the company had “submitted a petition for an accelerated trial along with the complaint, asking for the case to be heard in September, as it is very important that this issue be dealt with soon.”
Twitter CEO Parag Agrawal said, “We took this chance to tell our story and defend our company, our employees, and our investors.” He also said, “We want to hold the buyer fully responsible for meeting his contractual obligations. We will argue our case in court, and we think we will win.” The New York Times bought both of the memos.
Twitter wants you to try it out for four days in September. The end date of the agreement is October 24th. If the purchase still needs approval from the government at that time, Musk and Twitter will have six more months to finish it.
Brian J.M. Quinn, a professor of law at Boston College, says that Twitter’s legal arguments are strong. He pointed out that Musk’s tweets were all over the case. For example, the billionaire sent a tweet before signing the agreement that showed he knew what Twitter spam was. Musk tweeted, “We will beat the spam bots or die trying.”
“His tweets are going to make his lawyers very angry,” Mr. Quinn said about Musk. “They use every tweet against him that they can find.”
Still, Musk’s threat to leave could bring Twitter back to the negotiating table and let the billionaire buy the company for less. The two sides could come to an agreement in which Musk pays Twitter for their losses. Or, he could pay a $1 billion fee to get out of the deal, which is only allowed in certain cases, like if Musk’s funding doesn’t work out.
If Musk is able to get himself untangled from Twitter, it could be bad for the company. From his offer price of $54.20 per share, the stock has dropped more than 35%. In the past few months, Twitter’s business has also been bad. In a note to employees in May, Mr. Agrawal said that the company had not met its financial and business goals.
Now that Twitter has sued, Musk and his lawyers are likely to answer. After that, it’s not clear when the business and Musk will be called to a court in Delaware for the discovery process. This is where the two sides look for information they think is important to the case.
The case may then go to trial, but there is a chance that the judge assigned to the case will reject Musk’s attempts to stay out of jail. If the case goes to court, the judge will decide if Twitter’s disclosures were not enough and hurt the agreement in a big way. – The New York Times says so.