Elon Musk applauds Twitter lawsuit over $44 billion deal

Elon Musk on Friday accused Twitter of misleading him about his service, obfuscating the facts and failing to inform him of leadership changes, in his first official response to the company’s lawsuit seeking to force him into a settlement. $44 billion acquisition of the social media service.

Lawyers for Mr Musk, who struck the blockbuster deal to buy Twitter in April but has since attempted to terminate the purchase, presented the arguments in a legal filing intended to oppose the company’s request for a four-day trial in September in the case.

Twitter is rushing to court after “a two-month scavenger hunt of delays, technical bottlenecks, evasive responses and, ultimately, denials,” Musk’s lawyers said in the filing. They added that Twitter was trying to “hide the truth” about fake accounts on the service, an issue Mr Musk has made central to his desire to pull out of the deal.

Twitter had called for a lawsuit in September because Mr. Musk had to close his deal to buy the company by October 24. Mr. Musk’s lawyers have instead offered a February date for a trial, noting that the deal’s deadline automatically extends in the event of a dispute. . Banks that have pledged to contribute to the financing of the agreement have pledged this financing until April 25, 2023.

Mr. Musk’s legal brief was a strong rebuke to Twitter’s accusations that he was trying to unfairly end the acquisition. In its lawsuit this week, Twitter said Mr Musk had “knowingly, intentionally, willfully and materially breached” his agreement to buy the company by falsely claiming he was not obtaining information about the prevalence of fake accounts on the service.

The ensuing legal battle promises to be ugly and protracted. The back and forth between the two parties had already escalated for weeks before landing in court. Mr. Musk has made scathing comments about the company and has frequently questioned the prevalence of fake accounts on the platform. Fake accounts are used to spread spam or manipulate Twitter’s service by falsely trending, and are often automated rather than run by real people.

At one point, Mr. Musk tweeted that the deal with Twitter was on hold. His actions coincided with a decline in the value of tech stocks, including those of Tesla, the electric car maker that Mr. Musk runs and which is the main source of his wealth.

Twitter said it worked with Mr. Musk to complete the deal and intends to complete the sale. In the deal, Twitter and Mr. Musk have a so-called specific performance clause that allows the company to take legal action to force the deal, as long as the debt the billionaire incurred for the acquisition is in place.

A Twitter spokesperson declined to comment.

Ann Lipton, professor of corporate governance at Tulane Law School, said it was clear why Twitter was moving fast and Mr. Musk was not.

“Twitter’s board has a vested interest in getting this resolved quickly, and they have a vested interest in delaying — time is money,” she said. Of Mr. Musk, she added: ‘He’s going to want to get as much discovery as possible and take as long as possible, essentially suspending the threat of litigation itself and, over time, the uncertainty therein. is associated with forcing some sort of settlement or backing down.

In the legal filing, Mr Musk’s lawyers reiterated many of the arguments they made this month when the billionaire said he intended to terminate the deal.

Twitter failed to do a rigorous count of fake accounts and hampered Mr. Musk’s efforts to figure out how spam was counted, the filing said. “Musk was flabbergasted to learn how lean Twitter’s process was,” the filing said, noting that the company used people to understand information rather than machine learning.

Mr. Musk tried to get more data from Twitter on the fake accounts, the filing added, but the company “deliberately erected artificial roadblocks and frustrated the efforts of the defendants.”

To determine how Twitter counts fake accounts, Mr. Musk needed months of discovery and dozens of depositions, his lawyers said. Mr Musk claimed that Twitter’s public disclosures that fake accounts account for around 5% of active users are misleading. Incorrect numbers could be a “significant adverse effect” under the terms of the deal and allow Mr. Musk to walk away, his lawyers said, arguing that the numbers speak “directly to Twitter’s potential value to users. and advertisers”.

Twitter has made mistakes with its user numbers before, Mr. Musk’s lawyers said. In April, the company said it overestimated its active users from 2019 to 2021.

The company said in its complaint that it informed Mr. Musk’s lawyers of the two executives and that the lawyers did not “raise any objections”.

Twitter and Mr. Musk are scheduled for a hearing in the case Tuesday at Chancery Court in Delaware, where the company filed its lawsuit against the billionaire. Court Chancellor Kathaleen St. J. McCormick has been assigned to oversee the case and will decide whether to expedite the case, as Twitter has requested, or delay it for Mr. Musk.

If the lawsuit goes to trial, Judge McCormick will determine whether Mr. Musk should close the case. She could also let Mr. Musk walk away while forcing him to pay damages. According to many readings of Twitter’s contract with Mr. Musk, damages would be capped at $1 billion. The two parties could also settle or renegotiate the agreement.

Twitter has lost about a third of its value since Mr. Musk signed the deal to buy the company for $54.20 a share. The company is due to release its quarterly results next Friday.

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