(CN) — Twitter sued to force Elon Musk to follow through on a $44 billion deal to buy the company, accusing the billionaire Tesla founder of reneging on a binding agreement even as Musk accuses the social media platform of withholding critical information about fake accounts.
“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 three months later, Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” Twitter says in the lawsuit it filed Tuesday in the Delaware Court of Chancery, a specialized court for litigating corporate disputes. “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.”
Musk agreed to buy Twitter in April for $54.20 per share, a deal which would take the now-publicly traded company private.
Through its lawsuit, Twitter seeks to compel Musk to close the deal.
Brian J.M. Quinn, a professor at Boston College Law School who specializes in corporate law and mergers, said Musk’s complaint is couched in the language of buyer’s remorse.
“This is a very familiar argument to the courts in Delaware; a buyer agrees to buy and decides he or she has overpaid and wants out. Courts are not amenable to buyers who take this position,” he said.
Musk had been threatening to walk away since June, when he accused the company of materially breaching its obligations under the agreement by refusing to provide him with information about fake accounts.
“If Twitter is confident in its publicized spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate those estimates,” his Skadden Arps attorneys said in a letter filed with the U.S. Securities and Exchange Commission on June 6.
Twitter’s lawsuit characterizes Musk’s “exit strategy” as both a model of hypocrisy and bad faith, condemning him for demanding the platform turn over information about the number of “spam bots” only after the price of Tesla stock nosedived.
Twitter says Musk was well aware of the bot problem, telling board president Bret Taylor in a text message that a purge of fake users should be done after the company is taken private.
Twitter also charges Musk with insulting the company publicly in violation of a nondisparagement agreement, presenting an array of the tweets where he accuses the company of inaccurately estimating that fewer than 5% of its accounts are fake. The complaint also includes screen grabs of tweets where Musk appears to taunt the company.
“Musk’s conduct simply confirms that he wants to escape the binding contract he freely signed, and to damage Twitter in the process,” the company says.
Quinn was partial to Twitter’s case.
“Obviously Musk has not yet responded so we see only the facts presented by Twitter, but those facts are pretty compelling,” Quinn said. “The thing that grabs the attention the most is that they use every single tweet they can to hoist him on his own petard.”
He said Musk could have had a stronger leg to stand on had he not waived due diligence.
“He’s the richest man in the world. He has enough money; he just doesn’t want to spend it right now on this,” Quinn said.
Quinn said the Delaware Court of Chancery in well-versed in these kinds of cases, where a buyer tries to back out of a deal once it appears less lucrative.
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