Twitter Inc. and Tesla and SpaceX founder Elon Musk are set for a fierce legal battle over a failed takeover of the social media platform.
According to a court filing on Tuesday, July 12, Twitter sued billionaire Elon Musk in a Delaware court, seeking to order him to honor their merger deal at $54.20 per twitter share.
Elon’s Concerns Over Fake or Spam Accounts
Musk believes that unlike other parties subject to the Delaware contract law, he is free to change his mind, ditch Twitter Inc., disrupt its share value, and walk away.
On Friday, Musk confirmed he was terminating the deal since Twitter Inc. had failed to respond to his concerns over fake or spam accounts on the social media platform. He accused Twitter of misleading misrepresentations of the number of spam bots on the platform. And the non-disclosure of how prevalent these spam bots are on the service available on Twitter.
He argued that this non-disclosure is important in assessing Twitter’s business performance; without it, he would not move forward with the deal.
Twitter lawyers did little to deny Mr. Musk’s allegations, saying they were skeptical about disclosing all the details, fearing that the billionaire would build a competing platform soon after abandoning the Twitter acquisition.
Elon Musk’s Merger Violations, According to Twitter Inc.
Lawyers for Twitter Inc. accused Elon Musk of violations of the initial merger agreement. According to them, Musk was “secretly” amassing Twitter shares between January and March without properly disclosing these substantial acquisitions to the regulators.
As a result, the significant share acquisition would likely affect their initial terms of agreement with Elon Musk. Twitter also insisted that Musk’s accusations over spam accounts were just a pretext lacking merit and said his decision to walk away was primarily due to an overall decline in tech stock prices in the exchange market.
Twitter Off its Normal Course of Business
According to Musk, Twitter failed to follow its normal course of business. The company froze hiring new employees, fired senior leaders, and saw other significant staff departures. Musk noticed these changes constituted a material breach of their merger agreement, as they had no consent to conduct these changes.
Dipping Twitter Share Prices
Twitter prices traded at above $50 per share in late April, soon after Twitter’s board accepted Mr. Musk’s acquisition deal at $54.20 per share. But on Tuesday, it closed at $34.06 after Elon Musk announced on July 8 that he was ditching the agreement with Twitter.
Although this was a 4.3% rise in the stock prices, it was still far below the price at the time of closing the deal with the tech billionaire. By failing to complete his $44 billion takeovers, the social media giant feels that Elon Musk’s “bad faith” and “outlandish” actions have resulted in irreparable harm, wreaking havoc on Twitter’s stock prices.
As part of the deal, they signed in April, Elon Musk and Twitter Inc. agreed to settle a $ 1 billion breakup fee payable by the party responsible for the deal falling through. While Twitter lawyers could have pursued Mr. Musk to pay the hefty breakup fee, they are going further than that.
Twitter now wants Tesla and SpaceX CEO, Musk to complete the $44 billion acquisition deal they agreed upon earlier in April. In a separate filing, Twitter asked the Delaware court to schedule a consequent four-day trial in mid-September.