Elon Musk’s attempts to back out of his $44 billion buyout of the social media behemoth have been criticized by Twitter, which claims that his arguments are “invalid and unjust.”
The Tesla billionaire has declared he wants to break the agreement he made in late April since the platform’s operator apparently grossly underestimated the number of bot accounts that are present there.
According to the business’s attorneys Wachtell, Lipton, Rosen & Katz, “Mr. Musk’s and the other Musk Parties’ putative termination is illegal and unjust, and it constitutes a repudiation of their responsibilities under the Agreement [to buy the company],” in response to Musk’s accusations.
Twitter adhered to their end of the bargain, according to a letter issued to the Securities and Exchange Commission on Sunday, and “has not suffered and is not likely to suffer a Company Material Adverse Effect.”
Musk has often stated that Twitter’s estimate that 5% of accounts were bots was understating the numbers, but he has failed to present any evidence to support his claims.
The letter is sent at the beginning of what is anticipated to be a protracted legal struggle between Twitter and the world’s richest man as the latter tries to implement the agreement.
Musk tried to kill the deal on Friday, but the tech giant soon retaliated and said it will take Musk to Delaware Chancery Court to try to force the merger through.
According to the terms of the Merger Agreement, Twitter would be liable for $1 billion in damages if it decided to sue Musk for pulling out.
The price of Twitter stock dropped in response to the anticipated termination of the agreement.
The company’s shares were trading at $32.65 before opening on Tuesday, down 15% from the day’s closing price of $38.75 on Thursday.
In late April, Musk had agreed to buy out the tech behemoth for $54.20 a share.
With a series of memes in recent days, the billionaire has repeatedly made fun of Twitter taking him to court for canceling his $44 billion takeover.
Musk, 51, posted an image on social media of Chuck Norris in front of a chessboard with one pawn confidently facing out against a full set of black pieces.
Another person seemed to make fun of the social media behemoth for pursuing legal action since it requires them to reveal the information about their spam bots that he desires.
The comments were posted alongside images of him giggling uncontrollably on the right.
However, the richest man in the world steered clear of the subject when he made an appearance at the Sun Valley Conference in Idaho on Saturday. He eventually spoke out through memes.
They told me I couldn’t buy Twitter, one of them stated. Then they wouldn’t provide bot information.
“Now they want me to acquire Twitter first in court,” I said. In court, they must now divulge information on the bots.
He captioned the image of the famed TV tough guy Chuck Norris with the phrase “Chuckmate.”
Musk responded to a user who brought up the number of spambots they frequently encounter on the website.
Hellow??? @SECGov, the Securities and Exchange Commission’s Twitter handle, was all the South African wrote.
On Sunday, Twitter hired a powerful Delaware law firm to sue Musk for walking away from his $44 billion plan to acquire the business.
Leo Strine and Bill Savitt, attorneys who previously held the position of Chancellors of the Delaware Chancery Court, are now available to the business thanks to Wachtell’s hire.
Chancellor judges preside over non-jury proceedings in Delaware’s chancery courts.
Many prestigious US companies, including Twitter, have their corporate headquarters there, even though their primary offices are located elsewhere.
As a result, they frequently deal with business disputes.
Chancery courts do not have the power to impose punitive damages and typically hear cases more rapidly than criminal courts, thus the Twitter case will likely be resolved in a matter of months.
Musk retained Emanual Urquhart & Sullivan LLP, which also represented him in a defamation action in 2019 and is currently defending him in a Tesla-related lawsuit.
Less than 24 hours after announcing he was canceling a $44 billion plan to acquire Twitter Inc., the billionaire businessman and CEO of Tesla and SpaceX took the stage at the Allen & Co Sun Valley Conference, an annual meeting of media and technology leaders in Idaho.
This week’s off-the-record conference, dubbed the “billionaires’ summer camp,” was given a boost by Musk’s appearance. Normally, the headline-making takes place away from the media’s presence at such events.
The world’s richest man spoke about the potential for life on Mars in the future during the interview with Sam Altman, CEO of OpenAI, an artificial intelligence research startup financed by Musk and several others, but he avoided talking about Twitter.
One top media executive, who spoke before the interview on the condition of anonymity, said, “It just sounds like an awful catastrophe.”
“The man sets his own rules” The fact that you have to take this person seriously on Twitter makes me want to vomit.
Sun Valley is frequently covered like an athleisure version of the Met Gala, with photographers catching the visits of media moguls wearing fleece, and journalists noting power lunches at the Konditorei cafe on the premises.
This year’s five-day, invite-only conference, which runs from July 6 to 10, is taking place in a small community of barely 1,500 people near Idaho’s Sawtooth National Forest.
On Friday, a Hollywood power player voiced the hope that the Musk interview might lighten up the conference’s traditionally somber and cerebral tone.
One CEO pointed out the obvious after Musk made his announcement: two conference attendees, Twitter CEO Parag Agrawal and Chief Financial Officer Ned Segal, might find Saturday’s remarks uncomfortable.
In response to Agrawal’s defense of how Twitter handles spam bots, Musk sent one of his final tweets to the CEO in the shape of a feces emoji.
It’s unclear if Musk spoke with Segal or Agrawal at the Idaho event.
Musk announced his intention to cancel the acquisition of Twitter in an eight-page letter that his lawyers had given to Twitter.
According to the document, which was submitted to the Securities and Exchange Commission, Twitter failed to comply with repeated requests for information over the course of the previous two months or get his permission before taking decisions that would have an impact on its business, like firing two key executives.
The action, according to experts, may have been an attempt to lower the price. In April, Musk offered $54.20 a share, but on Friday night, the price was only $36.81.
Twitter’s chairman, Bret Taylor, stated in a tweet on Friday that the board was “committed to concluding the transaction” in accordance with the current terms of the agreement and that they were “confident” they would prevail.
Musk’s lawyer, Mike Ringler, asserted that Twitter had violated several major terms of the contract.
“Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect,” Ringler stated in the documents submitted to the SEC.
Twitter has not met with its contractual responsibilities, despite the fact that Section 6.4 of the Merger Agreement states that Twitter must give Mr. Musk and his advisors any data and information they seek “for any reasonable business purpose relevant to the closing of the deal.”
Mr. Musk has been looking for the data and information required to “conduct an unbiased assessment of the incidence of false or spam accounts on Twitter’s network” for almost two months.
This information is essential to Twitter’s operational and financial success and is required to complete the transactions envisioned by the Merger Agreement because it’s required to make sure Twitter satisfies the closing requirements, to make it easier for Mr. Musk to finance and plan the transaction, and to engage in transition planning for the company.
Twitter has either been unable or unwilling to offer this information. Twitter has occasionally ignored Mr. Musk’s demands, rejected them for apparent illogical reasons, and pretended to cooperate while providing Mr. Musk with inaccurate or partial information.
Musk had earlier threatened to call off the transaction unless the company could demonstrate that less than 5% of members on the social media platform were made up of spam and bot accounts.
However, Twitter vowed to sue right away and expressed confidence that it would prevail.
The Twitter Board is committed to completing the transaction at the price and terms agreed upon with Mr. Musk, and Taylor stated that the company plans to take legal action to enforce the merger agreement.
We’re sure we’ll win in the Delaware Court of Chancery, we say. Later, CEO Agrawal retweeted that statement.
The Delaware courts do a pretty decent job of balancing shareholder and corporate interests, according to Adam Sterling, who spoke to DailyMail.com.
Twitter has frequently found itself in difficult situations here, he continued. I believe it is obvious that given Elon’s attempts to cancel the agreement, they are required to take legal action against him in accordance with their fiduciary duties to their shareholders. Everything is shocking but not unexpected.
Given that this is an active legal case, you should refrain from Tweeting, Slacking, or providing any commentary concerning the Merger Agreement, according to an internal memo from Twitter’s general counsel.
An anonymous Twitter employee told NBC News that Musk had “f**king wrecked the company” in response to the failed transaction.
The worker remarked, “I suppose it seems like we won. However, it has the feel of the film’s climax, when Michael Bay’s explosion is behind the characters and they are covered in blood.
Although we could see this coming, he has already completely wrecked the company.
In an all-hands meeting with staff in April, Agrawal made an effort to calm tensions after staff members asked information on how managers would handle a Musk-inspired mass exodus.
If the Musk deal went through, Agrawal would have made $42 million.
Due to Musk’s decision, the 16-year-old San Francisco-based business and the billionaire are expected to engage in a protracted court battle.
Instead of a judge directing a transaction to be completed, contested mergers and acquisitions that are brought before Delaware courts typically result in the corporations renegotiating agreements or the acquirer paying the target a settlement to withdraw.
This is due to the fact that the target companies are frequently eager to end the uncertainty around their future and move forward.
According to a person familiar with the situation, Twitter, however, is hoping that court procedures will begin in a few weeks and conclude in a few months.
Renegotiations of deals have happened before. When the COVID-19 pandemic emerged in 2020 and sent a shockwave through the world economy, several firms re-priced previously agreed-upon acquisitions.
A contract with Tiffany & Co. was once threatened by the French retailer LVMH. The American jewelry retailer consented to a $425 million reduction in the transaction price to $15.8 billion.
According to Ann Lipton, associate dean for faculty research at Tulane Law School, “I’d think Twitter is well-positioned legally to argue that it provided him with all the essential information and this is a pretext to looking for any reason to get out of the arrangement.”
In extended trading, shares of Twitter were down 6% at $34.58. This is 36% less than the $54.20 per share Musk had agreed to pay to acquire Twitter in April.
After Musk purchased stock in the firm in early April, Twitter’s shares rose, protecting it from a severe stock market sell-off that battered rival social media companies.
But once he decided on April 25 to buy Twitter, the price started to decline quickly as investors worried Musk may back out of the agreement. After the bell on Friday, Twitter’s stock price fell to its lowest level since March.
The revelation adds another chapter to the will-he-won’t-he tale that began when Musk agreed to buy Twitter in April but postponed the transaction unless the social media company demonstrated that spam bots make up fewer than 5% of its overall user base.
If Musk cannot complete the sale due to factors such as the acquisition finance falling through or regulators opposing the deal, the contract stipulates that Twitter will receive a $1 billion break-up payment from Musk.
However, in the event that Musk decides to end the agreement on his own, the break-up fee would not be charged.
In a time when concerns about rising interest rates and a potential recession have battered Wall Street, Musk’s decision to back out of the agreement and Twitter’s pledge to fight tenaciously to finish it placed a shadow of doubt over the company’s future and its stock price.
Alphabet, Meta Platforms, Snap, and Pinterest, competitors in online advertising, have seen their stock prices fall an average of 45 percent in 2022, whereas Twitter has seen its share price fall just 15 percent during that time, helped recently by the Musk acquisition.
Wedbush analyst Daniel Ives claimed that Musk’s filing was negative news for Twitter.
In a note to clients, he declared that the situation was “a nightmare for Twitter and its Board,” as the company would now have to fight Musk in court for a protracted period of time in order to recover the deal’s value and/or the $1 billion breakup fee, at the very least.