Dhe takeover saga about Elon Musk and Twitter is now officially a case for the judiciary. On Tuesday, Twitter filed a lawsuit against the world’s richest person and wants to force the sale to him at the agreed price of $44 billion. Musk announced the cancellation of the purchase agreement last Friday and accused Twitter of violating clauses in the contract. Conversely, Twitter is now accusing Musk of breach of contract in its lawsuit.
The lawsuit was filed in a court in the US state of Delaware, where Twitter, like many other American companies, is based. This court has often dealt with mergers from which one of the parties involved wanted to withdraw.
Harsh criticism of Musk
Twitter attacked Musk in the lawsuit with sharp words. For example, it says, “Musk is refusing to honor his obligations to Twitter and its shareholders because the contract he signed no longer serves his personal interests.” After staging a “public spectacle” to make Twitter a takeover candidate he now apparently believes he can simply “change his mind, disparage the company, disrupt its operations, destroy shareholder wealth, and say goodbye.” Musk wanted out of the contract because the environment on the capital markets had deteriorated and the value of his stake in Tesla, and thus his assets, had decreased significantly. Instead of bearing the costs of this downturn himself, as the merger agreement actually requires, he wants to pass them on to Twitter shareholders.
In announcing his withdrawal last week, Musk highlighted his concern about the number of “spam” or “fake” accounts on Twitter that aren’t backed by actual users. Twitter says their share of published user numbers is less than 5 percent, Musk claims it could be significantly more. Through his lawyers, he has accused Twitter of making “false and misleading statements”.
Twitter describes this reasoning in the lawsuit as “hypocrisy.” Prior to signing the deal, Musk publicly described removing bogus accounts from the platform as one reason for his interest in Twitter. Now that the market environment has deteriorated and the transaction is less attractive from his point of view, he suddenly wants proof from Twitter that spam is not a serious problem.
The lawsuit was expected, and after Musk’s maneuvers last week, Twitter announced that it wanted to go to court. The company said it was determined to go through with the transaction on the original terms.
The financial markets are of course skeptical. Twitter’s share price was around $34 on Tuesday, a far cry from the $54.20 a share negotiated with Musk.