Twitter has sued Tesla CEO Elon Musk for attempting to back out of the $44 billion buyout deal. It has also asked the Chancery Court in Delaware to complete the merger agreement at the agreed upon rate of $54.20 per share. Also Read - Elon Musk teases his own new social media site X.com amid tussle with Twitter
“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. This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business,” Twitter wrote in its complaint. Also Read - Microsoft lays off employees from customer-focused R&D projects: Report
The lawsuit follows the latest SEC filing by Musk wherein he attempted to terminate the $44 billion deal to buy the micro-blogging platform. “For nearly two months, Mr Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform,” a clause in the regulatory filing reads. “Twitter has failed or refused to provide this information,” the filing says. Also Read - Elon Musk invites Parag Agrawal for public debate, sets condition on Twitter deal: Check details
Now, Twitter, in its complaint has alleged that Musk’s is not abandoning the deal owing to the company failing to provide him with sufficient information about bots on its platform — a condition that Musk has mentioned in the SEC filing — but owing to buyer’s remorse.
“After the merger agreement was signed, the market fell. As the Wall Street Journal reported recently, the value of Musk’s stake in Tesla, the anchor of his personal wealth, has declined by more than $100 billion from its November 2021 peak. So Musk wants out. Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders,” Twitter wrote in its complaint.
Musk in his letter has said that he was terminating the deal as Twitter withheld information regarding spam bots on its platform, which accounted for a ‘Company Material Adverse Effect’ event. He also said that the company breached the terms of the deal by terminating certain employees, slowing hiring, and failing to retain key personnel.
Responding to these complaints, Twitter said it did not share more information with Musk regarding spam accounts as it feared he would build a competing platform after abandoning the acquisition. Twitter also said that while negotiating the deal, it had ‘also negotiated for itself a right to hire and fire employees at all levels, including executives, without having to seek Musk’s consent’. “Musk’s initial draft of the merger agreement would have deemed the hiring and firing of an employee at the level of vice president or above a presumptive violation of the ordinary course covenant absent Musk’s consent. Twitter successfully struck that provision before signing,” the company wrote in its complaint.
Twitter in its complaint also accused Musk of secretly amassing its shares between January and March without properly disclosing the details to the regulators. “Starting in January 2022, Musk began purchasing Twitter stock. By March 14, 2022, he had secretly accumulated a substantial position — about 5% of the company’s outstanding shares. SEC regulations required that he disclose that position no later than March 24, 2022,” Twitter wrote.
“Musk failed to disclose, and instead kept amassing Twitter stock with the market none the wiser,” it added.
In a separate filing, Twitter has asked the Delaware court to schedule a four-day trial in mid-September.