Twitter Inc sued Elon Musk for violating his $44 billion deal to buy the social media platform and asked a Delaware court to order him to complete the merger at the agreed $54.20 per Twitter share.
The complaint stated that 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 lawsuit sets in motion one of the biggest legal showdowns in Wall Street history, involving one of the business world’s most colorful entrepreneurs in a case that will turn on staid contract language.
Stating that Twitter violated the agreement by failing to respond to requests for information regarding fake or spam accounts on the platform, which is fundamental to its business performance, Musk announced that he was terminating the deal.
The lawsuit accused the chief executive officer of electric vehicle maker Tesla Inc of ‘a long list’ of violations of the merger agreement that ‘have cast a pall over Twitter and its business.’
It said for the first time that employee attrition has been ‘on the upswing’ since the deal was announced.
The microblogging site also accused Musk of ‘secretly’ accumulating shares in the company between January and March without properly disclosing his substantial purchases to regulators, adding that he “instead kept amassing Twitter stock with the market none the wiser.”
On Tuesday, Twitter’s shares closed at $34.06, up 4.3%, but sharply below the levels above $50 where it traded when the deal was accepted by Twitter’s board in late April.
While Musk stated that executive departures amounted to a failure to conduct business in the ordinary course, Twitter said it removed that language from the merger contract during negotiations.
The social media platform also said it did not share more information with Musk regarding spam accounts because it feared he would ‘build a competing platform’ after abandoning the acquisition.
Calling the reasons cited by Musk a ‘pretext’ that lacked merit, Twitter said his decision to walk away had more to do with a decline in the stock market.
Tesla’s stock, the main source of Musk’s wealth, has lost around 30% of its value since the deal was announced and closed on Tuesday at $699.21.
In a separate filing, Twitter asked the court to schedule a four-day trial in mid-September.
From the information that is public Twitter would appear to have the upper hand, said legal experts.
According to Brian Quinn, a professor at Boston College Law School, in its complaint Twitter is taking a strong position that Musk had a case of buyer’s remorse – and that is the reason for his decision to walk away from the deal.
Quinn further said that the facts Twitter presents make an extremely strong argument in favor of Twitter getting this deal closed.
Musk is among Twitter’s most-followed accounts and the lawsuit included images of several of his tweets, including a poop emoji, that the company said violated the merger’s ‘non-disparagement’ clause.
Musk tweeted the emoji on May 16 in response to a pair of tweets by Twitter’s chief executive officer Parag Agrawal explaining the company’s efforts to fight spam accounts.
It also included an image of a text message Musk sent Agrawal after Twitter sought reassurances about Musk’s financing for the deal on June 28.
Twitter said that after Musk announced he was terminating the deal, he sent tweets on Monday that Twitter said suggested his requests about spam were part of a plan to force spam data into the public sphere.
