Twitter Inc. has sued Elon Musk for seeking to terminate his $44 billion acquisition deal for the company, and requested a court in Delaware force the world’s richest person to complete the sale.
The lawsuit, filed Tuesday in Delaware Chancery Court, pulls no punches in calling Musk’s exit strategy “a model of hypocrisy.” In a combative tone that is likely to be matched by the pugnacious Musk, Twitter’s TWTR, +4.32% lawyers wrote that the company brought 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 requested expedited treatment of the case in Chancery Court to protect its shareholders from “Musk’s attempt to bully his way out of an airtight merger agreement.” Such cases typically take a few months.
“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 alleges. “This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business.”
Twitter said Musk opted out when market conditions soured, leading to a decline in personal wealth of more than $100 billion since November 2021. “Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders,” the company said in the lawsuit, which seeks to consummate the transaction at the agreed $54.20 per Twitter share.
“So Musk wants out,” the suit continues. “Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders.”
Twitter made no secret it would pursue legal action after Musk sought to terminate the deal last week. In a letter to the Tesla Inc. TSLA, -0.54% and SpaceX CEO that was disclosed in a filing on Monday, Twitter’s lawyers said, “The Agreement is not terminated.” Musk “knowingly, intentionally, willfully, and materially breached” his agreement to buy the company, they charged.
Musk abruptly ditched the deal in large part on the premise that Twitter hadn’t provided the necessary data and information necessary to assess the prevalence of fake or spam accounts — Twitter claimed less than 5% of monetizable daily active users are false or spam accounts, while Musk claimed the number was much higher — and was “in material breach of multiple provisions” of the merger agreement.
In its suit, Twitter said it repeatedly cooperated with Musk to complete the deal “in accordance with the terms of the merger agreement” that includes providing Musk access to raw data on tweets being sent daily.
“Twitter has bent over backwards to provide Musk the information he has requested, including, most notably, the full ‘firehose’ data set that he has been mining for weeks — and has been continuing to mine since purporting to terminate — with the assistance of undisclosed data reviewers,” Twitter said in the 62-page filing.
The suit characterized Musk’s attempts to terminate the deal, including the widespread prevalence of bots on the service, as “pretexts.”
Another Musk grievance in rescinding the $44 billion deal — that Twitter breached the agreement by terminating some employees and failing to retain others who wished to leave — is “meritless and contrived,” the suit contends.
“Twitter specifically negotiated for the right to terminate employees,
including executives, without first having to obtain Musk’s consent,” the lawsuit says. “Musk had notice back in early May of many of the actions about which he now complains for the first time. He did not object then or at any point prior to his purported termination notice on July 8, because there was no violation.”