Musk’s lawyer argued in the Friday letter that Twitter ( TWTR ) was “in material breach of multiple provisions” of the deal, alleging that the company withheld data that Musk requested to estimate the number of bots and spam accounts in the platform. Twitter’s legal team hit back in a letter on Monday, calling the attempt to terminate Musk “invalid and unlawful,” claiming that Musk himself violated the agreement and demanding that he honor the deal.
In the complaint filed Tuesday, Twitter’s lawyers say they seek to prevent Musk from further violating the agreement and to “enforce the completion of the merger subject to the satisfaction of several outstanding conditions.”
“In April 2022, Elon Musk entered into a binding merger agreement with Twitter promising to use his best efforts to consummate the transaction,” the complaint states. “Now, less than three months later, Musk is refusing to fulfill his obligations to Twitter and its shareholders because the deal he signed no longer serves his personal interests.”
Shortly after news of the lawsuit was filed, Musk tweeted, “Oh what irony, hahahahaha.” Musk did not immediately respond to a request for comment from CNN.
The deal is now likely headed for a lengthy legal battle to determine whether Twitter can force Musk to close the deal and become its owner, or at least make him pay the $1 billion breakup fee set out in the original settlement.
After initially saying he wanted to buy Twitter to root out bots, Musk in recent weeks has raised concerns (without any visible evidence) that there are more bots on the platform than Twitter has publicly reported.
However, some analysts suggest that Musk simply wants an excuse to back out of a deal that now looks overpriced after Twitter’s stock and the overall tech market slumped. Shares of Tesla ( TSLA ), which Musk is relying on in part to finance the deal, also fell sharply after he agreed to the acquisition deal.
Twitter said in its Tuesday complaint that “after making a public spectacle of getting Twitter into the game, and after proposing and then signing a seller-friendly merger agreement, Musk apparently believes that he — unlike any other party subject to Delaware contract law—is free to change its mind, break up the company, disrupt its operations, destroy shareholder value, and walk away.”
It later added that Musk’s attempts to back out of the deal and his “disregard for Twitter and its staff … exposed Twitter to adverse effects on its business operations, employees and stock price.”
In fact, Twitter shares, which recovered about 4% on Tuesday after a sharp drop on Monday, are trading 34% below their price on the day Twitter and Musk struck the deal and 37% below Musk’s offer price, suggesting a deep skepticism about closing the deal, at least at its initial price. The sale price in the deal, $54.20 per outstanding share, represents a 38% premium over the stock’s price the day before Musk disclosed his stake in the company.
Very little about Musk and Twitter’s deal-making process is typical by corporate M&A standards, and Tuesday’s complaint seeking to enforce the agreement — which is filled with references to tweets, memes and a nod to the poop emoji – emphasizes how strange it was.
The document cited, for example, tweets from Musk in the days leading up to the deal in which he appeared to hint at launching a hostile takeover bid by tweeting “Love Me Tender” and a blank text followed by “is the night.” He also pointed to a tweet from Musk on Monday that included images of Musk laughing and suggested that if Twitter sued him to enforce the deal, it would have to disclose the bot data he had requested in court.
“To Musk, Twitter, the interests of its shareholders, the transaction Musk agreed to, and the lawsuit to enforce it all appear to be an elaborate joke,” the complaint said.
In the filing, Twitter disputes several of the ways Musk has accused the company of violating the acquisition agreement, including the claim in his Friday letter that Twitter violated the deal by firing two senior executives last month. Twitter argued that Musk wanted the merger agreement to state that the company could not hire or fire employees at or above the level of vice president or “above an alleged breach of contract in the ordinary course” without Musk’s consent. “Twitter successfully complied with this provision prior to signing,” the complaint said.
In connection with the complaint, Twitter filed a motion to expedite the case, asking that a four-day trial of the dispute be completed in September.
“The expedition is essential to allow Twitter to secure the benefit of its deal, to address Musk’s continued wrongdoing, and to protect Twitter and its shareholders from continued market risk and operational harm arising from Musk’s attempt to cheat the way from an unenforceable merger agreement,” the statement said.
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