Twitter has sued Tesla CEO Elon Musk in a bid to force him to complete the $44 billion acquisition of the social media platform.
Musk and Twitter have been preparing for a legal battle since the billionaire said he was pulling out of his April agreement to acquire the company.
Twitter’s lawsuit says: “Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.
“Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.”
Twitter’s lawsuit was filed in the Delaware Court of Chancery, which normally handles business disputes among the many corporations which include Twitter) that are incorporated there.
Musk alleged that Twitter did not provide enough information about the number of fake accounts on its platform. Last month, Twitter said it was making a “fire hose” of raw data on hundreds of millions of daily tweets available to Musk.
Twitter has said for years in regulatory filings that it believes around 5% of the accounts on the platform are fake. Also, Musk is alleging that Twitter violated the acquisition agreement when it fired two top managers and sacked a third of its talent-acquisition team.
When Musk made an offer to buy the company and take it private in mid-April, the board of Twitter initially attempted to prevent him by deploying a financial system that would have made the acquisition expensive.
Twitter later reconsidered the offer and concluded that selling the company to Musk for $54.20 per share was in the best interest of shareholders. Musk in a joint press release pledged to “unlock” Twitter’s potential by relaxing restrictions on speech and booting out fake accounts.
But his confidence was shortlived as Tesla’s stock plummeted amid a broader stock market selloff in May, and Musk soon became less enthusiastic about acquiring Twitter.
Twitter’s suit labels Musk’s tactics “a model of hypocrisy,” and noted that he had stated plans to take Twitter private in a bid to rid it of spam accounts. Once the market crashed, Twitter noted that “Musk shifted his narrative, suddenly demanding ‘verification’ that spam was not a serious problem on Twitter’s platform, and claiming a burning need to conduct ‘diligence’ he had expressly forsworn.”
In the same vein, Twitter charges that Musk operated in bad faith, and accused him of demanding company information so he could accuse Twitter of providing “misrepresentations” about its business to regulators and investors.
According to the suit, Musk “has been acting against this deal since the market started turning, and has breached the merger agreement repeatedly in the process. He has purported to put the deal on ‘hold’ pending satisfaction of imaginary conditions, breached his financing efforts obligations in the process, violated his obligations to treat requests for consent reasonably and to provide information about financing status, violated his non-disparagement obligation, misused confidential information, and otherwise failed to employ required efforts to consummate the acquisition.”
The lawsuit alleges that Twitter “has suffered and will continue to suffer irreparable harm” as a result of Musk’s contractual breaches that “cast a pall over Twitter and its business.”
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