On Tuesday, Twitter filed a lawsuit against Tesla CEO Elon Musk, attempting to compel him to finish his $44 billion buyout of the social media business by accusing him of “outlandish” and “bad faith” actions that have caused irreparable harm to the platform and “wreaked havoc” on its stock price.
Musk offered to pay $54.20 per share for Twitter in April, after the company reversed its initial rejection to the proposal. However, the two parties have been preparing for a legal battle since the billionaire announced on Friday that he was withdrawing from his agreement to buy the company.
The complaint filed by Twitter begins with a prickling accusation: “Musk refuses to fulfill 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,” the suit stated.
Twitter filed its complaint in the Delaware Court of Chancery, which hears business disputes involving Delaware-incorporated companies like Twitter.
Musk and Twitter agreed in April to pay a $1 billion breakup fee if either was responsible for the deal faltering. Instead of pressuring Musk to pay the excessive price, the company is attempting to force him to complete the entire $44 billion purchase approved by the company’s board.
“Oh the irony lol,” Musk tweeted after Twitter filed the lawsuit, without explanation.
According to Brian Quinn, a law professor at Boston College, Twitter’s arguments and facts are convincing and likely to gain a receptive ear in the Delaware court, which does not take kindly on sophisticated buyers with highly-paid legal advisers pulling out of deals.
“They make a very strong argument that this is just buyer’s remorse,” Quinn said. “You have to eat your mistakes in the Delaware Chancery Court. That’s going to work very favorably for Twitter.”
Twitter’s suit describes Musk’s tactics as “a model of hypocrisy,” noting that he has previously stated his intention to take Twitter private in order to free it of spam accounts.
“Musk shifted his narrative, now demanding ‘verification’ that spam was not a serious problem on Twitter’s platform, and claiming a burning need to conduct ‘diligence’ he had expressly foregone,” Twitter stated.
Similarly, the firm claims Musk acted in bad faith by collecting company information in order to accuse Twitter of making “misrepresentations” to authorities and investors about its operations.
“Musk has been acting against this deal since the market started turning, and has breached the merger agreement repeatedly in the process,” the suit charged.
“He has purported to put the deal on ‘hold’ pending satisfaction of imaginary conditions, breached his financing efforts obligations in the process, violated his obligations to treat requests for consent reasonably and to provide information about financing status, violated his non-disparagement obligation, misused confidential information, and otherwise failed to employ required efforts to consummate the acquisition.”