SAN FRANCISCO, United States — Twitter
on Tuesday sued
Elon Musk for breaching the $44 billion contract he signed to
buy the tech firm, calling his exit strategy “a model of hypocrisy”, court
documents showed.
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The suit filed in
the US state of
Delaware urges the court to order the billionaire to complete
his deal to buy Twitter, arguing that no financial penalty could repair the
damage he has caused.
“Musk’s conduct
simply confirms that he wants to escape the binding contract he freely signed,
and to damage Twitter in the process,” the lawsuit contended.
“Twitter has
suffered and will continue to suffer irreparable harm as a result of
defendants’ breaches.”
The social media
company’s shares edged up slightly in after-market trading when the news broke.
Legal experts and
market analysts see Twitter as having a strong upper hand heading into court,
Wedbush analyst
Dan Ives said in a note to investors.
“This will be a
Game of Thrones battle in court with the fake account/bot issue front and
center, but ultimately Twitter’s board is holding Musk’s feet to the fire to
finish the deal at the agreed upon price,” Ives said.
“Overall this has
been a black eye for Musk and horror movie for Twitter (and its employees) with
no winners since the soap opera began in April.”
After weeks of
threats, Musk last week pulled the plug on the deal, accusing Twitter of
“misleading” statements about the number of fake accounts, according to a
letter from his lawyers included in a US securities filing.
In his first public
remarks since the announcement, Musk took to Twitter over the weekend to troll
the company after it said it would sue to enforce the deal.
“They said I could
not buy Twitter. Then they would not disclose bot info. Now they want to force
me to buy Twitter in court. Now they have to disclose bot info in court,” he
wrote in a tweet, with included pictures of Musk laughing with glee.
The termination of
the takeover agreement sets the stage for a potentially lengthy court battle
with Twitter, which initially had opposed a transaction with the unpredictable
billionaire entrepreneur.
Twitter has
defended its fake account oversight and has vowed to force Musk to complete the
deal, which contained a $1 billion breakup fee.
‘Bent over backwards’
The social network says the number of fake accounts is less than five
percent, a figure challenged by Musk, who says he believes the percentage is
much higher.
“Twitter has bent
over backwards to provide Musk the information he has requested, including,
most notably, the full ‘firehose’ data set that he has been mining for weeks,”
the lawsuit said.
“From the outset,
defendants’ information requests were designed to try to tank the deal.”
Musk made his
unsolicited bid to buy Twitter without asking for estimates regarding spam or
fake accounts, and even sweetened his offer to the board by withdrawing a
diligence condition, the lawsuit said.
The way Musk used a
large chunk of his
Tesla shares to back financing for the deal meant that if
stock in the electric car maker declined, be would have to pony up or sell more
of it, according to the suit.
“Not only were
there no financing or diligence conditions, but Musk had already secured debt
commitments that together with his personal equity commitment would suffice to
fund the purchase,” it said.
Musk’s ability to
terminate the deal to buy Twitter before the “drop-dead” date of October 24 of
this year is extremely limited, and closing is subject to little more than
approval of Twitter shareholders and regulatory approvals, the suit added.
His norm-defying
conduct has come as little surprise to watchers of the Tesla and
SpaceX chief
after years of statements that flout or test convention and sometimes provoke a
crackdown from regulators.
While Twitter has
asked the court to enforce the deal, the company’s legal action could yield a
variety of outcomes.
“There are a range of possibilities that can come from the
Delaware court including settlement, breakup fee paid, deal enforced, and a
myriad of other outcomes,” analyst Ives wrote.
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