Twitter has filed a lawsuit in Delaware to force Elon Musk to buy the platform for $44 billion.
How do you think this dispute will play out?
The document reads:
“In April 2022, Elon Musk entered into a binding merger agreement with Twitter, promising to use his best efforts to get the deal done.
“Now, less than 3 months later, Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.”
“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.
“This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business. Twitter brings this action to enjoin Musk from further breaches, to compel Musk to fulfill his legal obligations, and to compel consummation of the merger upon satisfaction of the few outstanding conditions.”
Musk may start his own social media platform
“Musk, the Chief Executive Officer of Tesla, Inc., and leader of SpaceX and other entities, opened a Twitter account in 2009. His presence on the Twitter platform is ubiquitous. With over 100 million followers, Musk’s account is one of the most followed on Twitter, and he has Tweeted more than 18,000 times. He has also suggested he would consider starting his own company to compete with Twitter.”
“On April 25, 2022, Musk, acting through and with his solely-owned entities, Parent and Acquisition Sub, agreed to buy Twitter for $54.20 per share in cash, for a total of about $44 billion.”
Musk Offered to Buy Twitter for a 38% Premium
“That price, presented by Musk on a take-it-or-leave-it basis in an unsolicited public offer, represented a 38% premium over Twitter’s unaffected share price. The other terms Musk offered and agreed to were, as he touted, “seller-friendly.”
“There is no financing contingency and no diligence condition. The deal is backed by airtight debt and equity commitments. Musk has personally committed $33.5 billion.”
Musk’s Net Worth Took a $100 Million Cut
“After the merger agreement was signed, the market fell. As the Wall Street Journal reported recently, the value of Musk’s stake in Tesla, the anchor of his personal wealth, has declined by more than $100 billion from its November 2021 peak.”
“Musk wants out. Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders. This is in keeping with the tactics Musk has deployed against Twitter and its stockholders since earlier this year, when he started amassing an undisclosed stake in the company and continued to grow his position without required notification.
Musk’s Actions Have Devalued Twitter
“Since signing the merger agreement, Musk has repeatedly disparaged Twitter and the deal, creating business risk for Twitter and downward pressure on its share price.”
Twitter Calls Musk a “Hypocrite”
“Musk’s exit strategy is a model of hypocrisy. One of the chief reasons Musk cited on March 31, 2022, for wanting to buy Twitter was to rid it of the “crypto spam” he viewed as a “major blight on the user experience.”
“Musk said he needed to take the company private because, according to him, purging spam would otherwise be commercially impractical. In his press release announcing the deal on April 25, 2022, Musk raised a clarion call to “defeat the spam bots.” But when the market declined and the fixed-price deal became less attractive, Musk shifted his narrative, suddenly demanding “verification” that spam was not a serious problem on Twitter’s platform, and claiming a burning need to conduct “diligence” he had expressly forsworn.
“Musk’s strategy is also a model of bad faith. While pretending to exercise the narrow right he has under the merger agreement to information for “consummation of the transaction,” Musk has been working furiously — albeit fruitlessly — to try to show that the company he promised to buy and not disparage has made material misrepresentations about its business to regulators and investors.”
“He has also asserted, falsely, that consummation of the merger depends on the results of his fishing expedition and his ability to secure debt financing.”
Musk Gave Twitter Notice that he Would Terminate the Acquisition
“On July 8, 2022, a little over a month after first using bad-faith pursuit of spam-related evidence to assert a baseless claim of breach, Musk gave Twitter notice purporting to terminate the merger agreement.
Musk’s notice stated 3 reasons to terminate the Twitter deal:
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Purported breach of information-sharing and cooperation covenants.
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Supposed “materially inaccurate representations” in the merger agreement that allegedly are “reasonably likely to result in” a Company Material Adverse Effect
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Purported failure to comply with the ordinary course covenant by terminating certain employees, slowing hiring, and failing to retain key personnel.
Twitter says “these claims are pretexts and lack any merit.”
Twitter stated it has abided by its covenants, and no Company Material Adverse Effect has occurred or is likely to occur.
Musk Has Repeatedly Breached the Agreement
The document reads, “Musk, by contrast, has been acting against this deal since the market started turning, and has breached the merger agreement repeatedly in the process.”
“He has purported to put the deal on “hold” pending satisfaction of imaginary conditions, breached his financing efforts obligations in the process, violated his obligations to treat requests for consent reasonably and to provide information about financing status, violated his non-disparagement obligation, misused confidential information, and otherwise failed to employ required efforts to consummate the acquisition.”
Musk MUST Buy Twitter
“Twitter is entitled to specific performance of defendants’ obligations under the merger agreement and to secure for Twitter stockholders the benefit of Musk’s bargain. Musk and his entities should be enjoined from further breaches, ordered to comply with their obligations to work toward satisfying the few closing conditions, and ordered to close upon satisfaction of those conditions.”
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ABOUT THE WRITER:
Elena Patestas is a journalist and writer for Valuetainment media. She attended Pepperdine University in Malibu, California, and Adelphi University on Long Island, New York. She was born and raised in Roslyn, New York, and currently lives in Miami, Florida.
Elena is passionate about bringing positive change to our world and believes education is the root to solving many societal problems. After overcoming a chronic health condition, Elena became passionate about health and believes food is the key to preventing dis-ease and achieving optimum health.
Amongst her many goals, she hopes to bring positive, impactful change to our world to create a healthy, financially sound, and unified society.
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