Twitter said Musk, after entering a binding merger agreement, now “refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.”
Twitter’s suit was expected after Musk said late last week that he no longer plans to buy the social network, citing Twitter bots and claiming that the company didn’t give him the information he needed to evaluate the deal.
The lawsuit filed on Tuesday marks the beginning of what could be a protracted legal battle as Twitter seeks to hold Musk to his deal to pay $54.20 per share for the company, and as Musk seeks to be let out of the agreement.
The lawsuit paints a picture of Musk going out of his way to make an unexpected and unusually generous offer to Twitter, only to almost immediately turn around and start toying with the company and the idea of abandoning their agreement. After the market turned and tech stocks began sinking, Twitter alleges that Musk looked for an escape from the deal, which required a “material adverse effect” or breach of contract. “Musk had to try to conjure one of those,” the lawsuit states.
That’s where Musk’s argument about Twitter having a spam bot problem came in, according to the lawsuit. Despite his concerns, the lawsuit alleges that Musk didn’t ask Twitter about its spam estimates before the agreement was in place. “He even sweetened his offer,” the lawsuit says, by removing a diligence condition from the agreement that would have given him access to non-public information about the company.
His 2018 “funding secured” tweet about taking Tesla private spurred several lawsuits and an inquiry by the US Securities and Exchange Commission. In April, he lost a court bid to get out from under terms of the 2018 settlement he agreed to with the SEC, which required review of any Tesla-related tweets.
Delaware, the corporate home to more than 60% of Fortune 500 companies, has a court system that is well-versed in business battles. In recent years, the chancery court has ruled on failed mergers such as the combination of insurers Anthem Inc. and Cigna Corp., as well as retailer LVMH Moet Hennessy Louis Vuitton SE and jeweler Tiffany & Co.
Earlier this year, Musk won a suit filed in Delaware by investors who claimed that the Tesla buyout of SolarCity was improper.
Twitter shares lost 12% of their value in the first trading day after Musk announced he was walking away from the deal. The stock is down 21% from the start of the year, trading at $34.04 at the close Tuesday.
“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.
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