Twitter Sues Elon Musk for Trying to Back Out of Deal

Twitter Inc. filed a lawsuit against billionaire Elon Musk for his abandoned takeover offer of $44 Billion.

Lawyers for Twitter told a Delaware judge that the world’s richest man failed to honor his agreement to pay $54.20 a share for the San Francisco-based social-media platform. Musk pulled out of the deal on Friday due to concern about fake accounts.

Twitter Chairman Bret Taylor said last week that the company planned to pursue legal action against Musk, and in a letter released Monday, its lawyers called the deal termination “invalid and wrongful.” The filing sets up what will be a closely watched court battle between Musk and Twitter, a communications tool that the billionaire favors but where his missives have previously gotten him in legal trouble.

Musk backed out of the deal to buy the platform on July 8 saying in a regulatory filing that the company has made “misleading representations” over the number of so-called spam bots on the service. Twitter hasn’t “complied with its contractual obligations” to provide information about how to assess how prevalent the bots are on the social medial service,” Musk said in a letter to Twitter that was included in the regulatory filing.

Musk also suggested that Twitter is not operating in its normal business course. Musk claimed that Twitter had ceased to be a normal business entity and instituted a freeze on hiring, as well as firing senior executives. “The company has not received parent’s consent for changes in the conduct of its business, including for the specific changes listed above,” Musk said in the letter, calling it a “material breach” of the merger agreement.

Musk’s deal with Twitter had included a provision that if it fell apart, the party breaking the agreement would pay a termination fee of $1 billion, under certain circumstances. Experts in legal matters have debated whether Musk should be allowed to walk out of the agreement due to the dispute over spambots.

The merger agreement includes a performance clause that permits Twitter to make Musk sign the deal. Twitter must prove it didn’t violate the buyout agreement’s terms and that Musk breached the pact by pulling out. The company hired merger law heavyweight Wachtell, Lipton, Rosen & Katz to represent it in the fight.

While he hasn’t been sued by the company before, Musk has faced several Twitter-related legal challenges in the past, including winning a defamation suit by someone that he called a “pedo” on the platform.

His 2018 “funding secured” tweet about taking Tesla Inc. private spurred several lawsuits and an inquiry by the US Securities and Exchange Commission. He lost his court battle to end the terms of the 2018 settlement with the SEC. This required that any tweets related to Tesla be reviewed.

Delaware is the corporate headquarters of more than 60% Fortune 500 companies. The state has a well-respected court system for business litigation. In recent years, the chancery court has ruled on failed mergers including insurers Anthem Inc. and Cigna Corp., as well as retailer LVMH Moet Hennessy Louis Vuitton SE and jeweler Tiffany & Co.

He won an earlier suit in Delaware from investors who claimed the Tesla Inc. purchase of SolarCity was illegal.

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