Twitter Inc (TWTR.N) sued Elon Musk on Tuesday for breaching his $44 billion commitment to purchase the social media platform, requesting that a Delaware court force Musk to complete the transaction at the agreed $54.20 per Twitter share.
According to the lawsuit, “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 kicks off what promises to be one of the largest legal battles in Wall Street history, pitting one of the business world’s most flamboyant entrepreneurs against staid contract wording.
Musk said on Friday that he was canceling the agreement because Twitter breached it by failing to respond to demands for information on fraudulent or spam accounts on the network, which is critical to its commercial success. more info
Musk, the CEO of electric car manufacturer Tesla Inc, did not immediately reply to a request for comment.
The complaint accused Musk of “a long list” of merger agreement breaches that “have cast a pall over Twitter and its business.” For the first time since the acquisition was announced, it stated that staff churn had been “on the upswing”
Twitter also accused Musk of “secretly” purchasing shares in the firm between January and March without properly revealing his significant acquisitions to authorities, saying he “instead kept amassing Twitter stock with the market none the wiser.”
Twitter shares finished at $34.06 on Tuesday, up 4.3 percent, but still much below the levels around $50 where they traded when the transaction was approved by Twitter’s board in late April. After the bell, the stock gained another 1%.
Musk said he was canceling the merger due to a lack of knowledge concerning spam accounts and misleading statements, which he called a “material adverse event.” He also said that executive departures amounted to a failure to continue business as usual, despite Twitter’s claim that it eliminated that provision from the merger deal during discussions.
Twitter also said that it did not disclose additional information with Musk about spam accounts because it believed he would establish a competitive platform if the transaction was abandoned.
Twitter labeled Musk’s arguments a “pretext” with no validity, and suggested his choice to leave had more to do with a drop in the stock market, especially for tech equities.
Tesla stock, Musk’s major source of wealth, has lost about 30% of its value since the acquisition was disclosed, closing on Tuesday at $699.21.
Twitter urged the court in a second petition to arrange a four-day trial in mid-September.