Twitter sues Elon Musk for attempting to abandon $44 billion acquisition
Twitter vs. Elon Musk is moving to the courts. The social media company filed a lawsuit against the world’s richest man on Tuesday, saying that he is refusing to “honor his obligations” under their agreement and seeking to make him complete the deal. Musk is trying to exit the $44 billion acquisition deal they announced on April 25th based on his claims Twitter has failed to satisfy his requests for information about bot activity and spam on the platform.
“Twitter brings this 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 writes in the lawsuit, which was filed in the Delaware Court of Chancery where the company is incorporated. Catherine Hill, a spokesperson for Twitter, didn’t have a comment beyond the legal filing, while Twitter board chairman Bret Taylor said the lawsuit is intended to “hold Elon Musk accountable” in a brief tweet.
Shortly after Twitter filed the suit, Musk responded with a tweet of his own, saying, “Oh the irony lol.”
Twitter has filed a lawsuit in the Delaware Court of Chancery to hold Elon Musk accountable to his contractual obligations.
— Bret Taylor (@btaylor) July 12, 2022
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.
Twitter CEO Parag Agrawal has written threads about how the company calculates its estimates of daily active users, and Twitter recently told reporters it blocks 1 million spam accounts every day. The lawsuit cited many of Musk’s own tweets, including his public call for an investigation by the SEC, the poop emoji he sent in reply to CEO Parag Agrawal, and memes Musk tweeted over the weekend.
Twitter’s complaint is full of details about the discussions between Musk’s team and Twitter management over the past couple of months, including texts recently sent by Musk telling the CEO and CFO to stop investigating the status of his financing for the deal.
It makes a point to stress that Twitter gave Musk more data about bots than he was owed under the conditions of the agreement, including access to its so-called firehose of tweet data. Musk’s counsel apparently wanted more than that, asking for emails and text messages of executives about the topic — a request Twitter’s lawyers call “highly unusual” given his initial decision to not undergo diligence.
Morale inside Twitter has taken a substantial hit since the deal with Musk was announced, with employee attrition “on the upswing since the signing of the merger agreement,” according to the complaint. Twitter alleges that Musk blocked its attempts at putting in place compensation programs to retain top talent while the deal was being completed. (Before backing out, Musk publicly indicated that he would bring layoffs to Twitter if his offer went through.)
Given that the merger agreement with Musk has an October 24th “drop-dead” deadline of expiration, Twitter wants its case heard before then. The company is pushing for its case to go to trial over just four days in mid-September, according to a separate motion to expedite filed by the company.
To fight Musk, Twitter has secured the legal services of Wachtell, Lipton, Rosen & Katz, a powerhouse firm with deep connections to the Delaware Court of Chancery and its history of hearing high-stakes corporate disputes.
You can read Twitter’s full complaint below:
https://www.theverge.com/2022/7/12/23205624/twitter-sues-elon-musk-acquisition-agreement