SAN FRANCISCO—As expected, Twitter has filed a lawsuit again Elon Musk in Delaware Court of Chancery, seeking to force him to go ahead with the “binding merger agreement,” the two parties signed in April when Musk agreed to acquire the Twitter for $44 billion.
Twitter’s stock quickly declined after the deal was announced and in recent weeks Musk raised a number of concerns about the deal, particularly complaining about the issue of fake accounts or bots that increased Twitter traffic.
Last week Musk’s lawyers filed a letter with the Securities & Exchange Commission arguing that “Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement,” including Twitter’s failure to provide “information necessary to `make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform’”
Twitter’s lawsuit follows through on a promise made by the chairman of its board last week when Musk backed out of the deal.
On July 8, Twitter chairman Bret Taylor tweeted that “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”
The lawsuit filed on July 12th, complains that “In April 2022, Elon Musk entered into a binding merger agreement with Twitter, promising to use his best efforts to get the deal done. Now, less than three months later, Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests. 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 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."
The suit also contends that declines in Musk’s Tesla stock were a key motive for him to try to wiggle out of the agreement and that Musk was merely using the issue of the fake accounts as an excuse to preserve his wealth.
The full complaint is available here.
