In a lawsuit filed on Tuesday, lawyers for Twitter accused Elon Musk of “refusing to honor his obligations.” The suit was filed in Chancery Court in Delaware, where Twitter is incorporated.
At issue in the lawsuit is Musk’s attempt last week to “terminate” the merger agreement he signed in April, noting that he would acquire Twitter and take it private for $54.20 per share, putting a value on the deal of $44 billion.
Lawyers for Twitter over the weekend called Musk’s move “invalid and wrongful.”
In the billionaire’s letter backing out of the deal, he accused Twitter of refusing to hand over “useable” user data, said it had misled him and the SEC on the number of “bots” or spam accounts present on the platform, and that it had made decisions to conduct layoffs and let go of key executives without getting his approval.
All the above mentioned allegedly constitute a “breach” of the agreement, Musk’s lawyers said. This means that he can walk away from the deal and that he does not even have to pay the $1 billion break-up fee included in the agreement.
Twitter pushed back against all of those points in its lawsuit, calling them “pretexts” that “lack any merit.” It argued that the merger agreement Musk signed in April is not only “binding,” and that he legally must complete the deal as agreed to, but that he is only attempting to back out now “because it no longer serves his personal interests.”
Musk appeared to respond to the lawsuit on Twitter not long after it was filed, writing only “Oh the irony lol.”
Lawyers for Twitter narrowed down to Musk’s personal wealth, largely tied up in Tesla stock, the price of which has fallen 44% this year along with tech stocks generally.
They said the value of his Tesla stake has fallen by over $100 billion since late last year. Now Musk simply “wants out” of his agreement to buy Twitter since the stock market is down, and wants to “shift the cost” of the downturn onto Twitter’s shareholders.
“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,” lawyers for Twitter said.
“This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business.”
The lawyers further pointed to several of Musk’s tweets discussing the acquisition and certain of Twitter’s executives, saying each constituted a breach of confidentiality and disparagement clauses in the agreement.”
“They claim he failed to provide reasonable information on his financing of the deal and failed to treat other requests “reasonably.”
Twitter went ahead to cover several areas speculated as possible soft spots in the agreement with Musk, including his financing for the deal. The platform called both the debt and equity financing portions of the deal “airtight” and pointed to Musk’s personal commitment of $33.5 billion.
The social media giant also held Musk at least partially responsible for the decline in its own stock price, which is down 20% this year, saying the billionaires “antics” and the “disdain he has shown” for the company resulted in more business risks and put pressure on its stock.
Despite this, Twitter insists that Musk is obligated to go through with acquiring the company at the agreed upon price of $44 billion. It asked the court to force him to close the deal and to enjoin him “from further breaches” of the agreement.
Twitter is also asking that the case be heard on an expedited basis, coming before a judge in September, given the potential impact a prolonged fight will have on its business.
Musk’s lawyers are yet to comment.