Twitter sued Tesla CEO Elon Musk on Tuesday for trying to bail out of the $44 billion deal to buy the social media company.
Driving the news: The lawsuit, which was filed in the Delaware Court of Chancery where Twitter is incorporated, stated that Musk failed to fulfill his contractual obligations, acting hypocritically and in bad faith, per The Verge.
Details: Instead of bearing “the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders,” the social media company said in the suit.
- “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,” it further stated, referencing Musk’s accumulation of 9.1% shares, which made him the largest shareholder by April 1.
- “It tracks the disdain he has shown for the company that one would have expected Musk, as its would-be steward, to protect,” the suit said, per PC Mag, adding, “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.”
- Calling the billionaire CEO’s exit strategy “a model of hypocrisy,” the suit said that it was Musk who wanted to buy Twitter and get rid of the “(c)rypto spam” that reduces user experience. But when the market declined, he suddenly started demanding the social media company reveal data about the spam problem, claiming to conduct “diligence,” a right he had foresworn, according to the lawsuit.
- “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,” Twitter wrote in the complaint, per CNBC News.
State of play: The company has “filed a motion for an expedited trial alongside the complaint, asking for the case to be heard in September, as it is critically important for this matter to be resolved quickly,” Sean Edgett, Twitter’s general counsel, told employees in a memo obtained by The New York Times.
What’s next: Either the Chancery Court sides with Twitter or Musk, one of whom will have to pay the $1 billion breakup fee. Another possibility is an out-of-court settlement, where Musk pays a bigger break-up fee or Twitter agrees to sell at a lower price, according to Axios.