Twitter sues Elon Musk to force  billion takeover – The Hollywood Reporter

Twitter sues Elon Musk to force $44 billion takeover – The Hollywood Reporter

Twitter has sued Elon Musk over his decision to cut a $44 billion acquisition of the social media company, arguing that he must complete the deal in accordance with the merger agreement.

“After putting on a public spectacle to bring Twitter into play and proposing and then signing a seller-friendly merger agreement, Musk apparently believes he—unlike any other party subject to Delaware contract law—is free to change your mind, disrupt the company, its operations, destroy shareholder value and walk away,” the complaint filed Tuesday in the Delaware Court of Chancery said.

Musk made a $44 billion cash offer in April to buy Twitter to “unlock” its potential to be “the platform for free speech around the world”. He began buying shares discreetly in January and built his stake in the company until he owned five percent two months later.

But when his fortune plummeted in the tumble of Tesla stocks, Musk soured the deal. He told Twitter on July 8 that he is ending his proposed purchase of the company. He argued in a letter that Twitter violated the merger agreement, pointing to “false and misleading statements” about its bot and spam accounts. He also disagreed with the “declining business prospects and financial prospects” following the departures of key executives, layoffs and a hiring freeze.

Twitter responded that it would take legal action to ensure the deal goes through at the agreed price and terms.

According to the indictment, Twitter can force Musk to go through with his acquisition. It pointed to language in the merger agreement stipulating that the company “is entitled to specific performance or other equitable remedies to enforce the deal”. Specific performance is a contract law remedy where a court instructs a party to comply with the terms of a contract to the best of its ability.

“Twitter negotiated for itself a robust right to demand specific performance of the terms of the agreement, including the right to coerce defendants into the deal, and ensured that Musk was personally bound by that provision,” the indictment reads. .

In 2021, the Delaware Chancery Court refused to let a private equity firm pull out of an agreement to buy DecoPac, a cake decorating company, despite the lack of debt financing. In that case, the company also took steps to lay a foundation for breaking the deal, as Musk allegedly did.

Twitter said in June it would meet Musk’s demand for internal data on spam bots and fake accounts after it threatened to walk away from the deal. The company said it would provide access to the so-called “firehouse” of data, consisting of a real-time record of more than 500 million tweets posted daily and information about the accounts and devices from which the messages are sent. It may be difficult for Musk to walk away from the deal by claiming that Twitter has made material misrepresentations that he relied on, as the company has qualified in securities filings that its estimate of spam accounts for less than five percent of its business. its monetized daily active users are too low.

“We applied significant judgment in making this decision, so our estimate of fake or spam accounts may not accurately reflect the true number of such accounts, and the true number of fake or spam accounts may be higher than we have estimated,” reads a filing with the Securities and Exchange Commission.

Twitter is represented by Peter Walsh of Potter Anderson & Corroon, Wilson Sonsini Goodrich & Rosati and merger heavyweight Wachtell, Lipton, Rosen & Katz. Musk has hired Quinn Emanuel Urquhart & Sullivan, who successfully defended him in a libel suit and represented him in a shareholders’ lawsuit over his attempt to take Tesla private.

Both parties agreed in the merger agreement to litigate any dispute in the Court of Chancery, which is known for resolving conflicts much faster than other courts. Chancellery judges specialize in corporate law and handle cases without a jury. The case is likely to be resolved through a settlement within a few months.

In a similar case that ended in a settlement, Tiffany sued French luxury goods giant LVMH in Delaware court. The company alleged that the owner of Louis Vuitton had deliberately tried to delay and renegotiate the $16 billion acquisition. LVMH eventually completed the deal valuing Tiffany at $15.8 billion.

Twitter shares closed at $32.65 Monday, a long way from the $54 per share Musk was willing to pay at a valuation of $41.4 billion. It is widely believed that Musk’s meddling in the company contributed to its declining value.

Twitter has been sued by investors seeking to block the deal, as well as shareholders seeking to force the company to share internal documents about its spam bots and fake accounts.