Twitter filed its expected lawsuit against Elon Musk today, demanding that he complete the $44 billion purchase of the social network.

“Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” the lawsuit said. “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.”

The suit accused Musk of “a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business” and asks the court to “compel consummation of the merger upon satisfaction of the few outstanding conditions.” The lawsuit points out that in the purchase agreement, “Twitter negotiated for itself a robust right to demand specific performance of the agreement’s terms that encompassed the right to compel defendants to close the deal, and ensured that Musk personally was bound by that provision (among others).”

The lawsuit was filed today in the Delaware Court of Chancery. You can read the whole thing here, and we’ll be adding to this breaking news article as we read Twitter’s complaint.

Musk’s unsolicited, “seller-friendly” offer

The lawsuit describes how Musk made an unsolicited bid to buy Twitter for $54.20 per share, a “take-it-or-leave-it” offer that “represented a 38 percent premium over Twitter’s unaffected share price.”

“The other terms Musk offered and agreed to were, as he touted, ‘seller friendly.’ There is no financing contingency and no diligence condition. The deal is backed by airtight debt and equity commitments. Musk has personally committed $33.5 billion,” Twitter’s complaint said.

But the market fell after the agreement was signed, and “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,” the lawsuit said. “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. This is in keeping with the tactics Musk has deployed against Twitter and its stockholders since earlier this year, when he started amassing an undisclosed stake in the company and continued to grow his position without required notification.”

Since agreeing to buy the company, Musk has also “repeatedly disparaged Twitter and the deal, creating business risk for Twitter and downward pressure on its share price,” the complaint said.

“Model of hypocrisy”

“Musk’s exit strategy is a model of hypocrisy,” the lawsuit continued, pointing out that one of Musk’s chief stated reasons for buying Twitter “was to rid it of the ‘[c]rypto spam’ he viewed as a ‘major blight on the user experience.’ Musk said he needed to take the company private because, according to him, purging spam would otherwise be commercially impractical.” In the press release announcing the deal, Musk said his goals included “defeating the spam bots, and authenticating all humans.”

Musk made his offer to buy Twitter “without seeking any representation from Twitter regarding its estimates of spam or false accounts,” and “even sweetened his offer to the Twitter board by expressly withdrawing his prior diligence condition,” the lawsuit said. But after the market started dropping, Musk started questioning Twitter’s spam estimates and eventually claimed that Twitter broke the merger deal by not providing all the spam data he requested.

“Musk shifted his narrative, suddenly demanding ‘verification’ that spam was not a serious problem on Twitter’s platform, and claiming a burning need to conduct ‘diligence’ he had expressly forsworn,” the complaint said.

Musk centered the dispute over Twitter’s estimate that fewer than 5 percent of monetizable daily active users (mDAUs) are spam or fake. “Musk wanted an escape. But the merger agreement left him little room,” the complaint said. “With no financing contingency or diligence condition, the agreement gave Musk no out absent a Company Material Adverse Effect or a material covenant breach by Twitter. Musk had to try to conjure one of those.”

https://arstechnica.com/?p=1866296