The saga over Elon Musk’s $44 billion bid to buy Twitter has taken another turn – with legal action meaning the Tesla billionaire could be forced to buy the social media giant despite pulling out of the deal.
Musk announced his intention to pull out of the sale, citing Twitter’s inability to provide accurate figures over the number of fake accounts.
Now though, Twitter has hired a high-profile legal team to represent it in its legal battle with Musk over his decision.
Twitter officials reportedly engaged Wachtell, Lipton, Rosen & Katz LLP, a merger and acquisition legal firm based in New York law, to handle Musk’s anticipated suit.
The team intends to file a lawsuit in the Delaware Court of Chancery, where many corporate disputes are held, as early as this week.
Musk began to sour on the deal only weeks after agreeing to buy Twitter in April, alleging that the firm failed to offer enough data on the amount of automated, fraudulent, or spam accounts utilizing the service.
Twitter argues that it has completely met the deal’s transparency terms, including giving Musk a “fire hose” of data containing millions of real-time tweets.
Musk asserts in a complaint with the Securities and Exchange Commission that the exact size of Twitter’s user base is a significant fact about the firm since advertising accounts for 90% of its revenue.
If Twitter isn’t stating the actual facts, his legal team believes it provides him a legitimate justification to back out of a deal he’s contractually committed to close.
Twitter officials feel they have a compelling case that Musk breached the terms of the April acquisition deal, in which he agreed to pay $54.20 per share of the company’s stock.
It won’t be easy for Twitter, as a protracted legal battle is likely.
Musk is the richest person in the world and has limitless legal resources as well as his well-documented determination to get his way.
The battle could have an effect on Twitter’s ability to develop new projects and employ staff.
Twitter’s board chairman, Bret Taylor, has responded to Musk’s decision to pull out of the agreement.
He stated that the firm is “committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement.
“We are confident we will prevail in the Delaware Court of Chancery.”
One outcome is that Musk may be obliged to pay a $1 billion breakup fee under the provisions of the takeover agreement.
Twitter’s share price drop is part of a larger technology market downturn that has affected Tesla, the electric automaker whose largest shareholder is Musk.
Since early April, Tesla shares have lost about one-third of their value.
The retaining of Wachtell, Lipton by Twitter comes only days after Musk’s attorneys accused Twitter in a Securities and Exchange Commission filing.
The accused that Twitter was “in breach” of the conditions of the takeover deal for failing to properly disclose information on its dependence on “false and spam accounts” in its membership claims.
Skadden, Arps, Slate, Meagher & Flom LLP is Musk’s legal counsel.
Twitter declined to comment on Sunday. Musk and Wachtell did not reply to requests for comment through email.
Musk is also facing legal action from Twitter’s board accusing him of buying stock at an artificially low price.
Source: The Washington Post