Twitter’s lawsuit withis getting more and more intense.
Musk, who is trying to pull out of a $44 billion deal to buy the company, is scheduled to be questioned under oath by Twitter’s lawyers next week. Musk’s testimony is scheduled to begin on Sept. 26 and could take three days, according to a filing Tuesday with the Delaware Court of Chancery.
The filing is the latest development in an ongoing legal battle between Musk and Twitter. Last week,voted to approve the deal, and Twitter co-founder and CEO Jack Dorsey is scheduled to testify today.
Twitter is suing Musk, who runs Tesla and SpaceX, because the billionaire said in July he no longer wanted to buy Twitter and privatize the company. Musk’s attempt to back down from taking over the social media site has raised concerns about Twitter’s future.
Musk has said the deal can’t move forward until he has evidence that less than 5% of Twitter’s 229 million daily users in Q1 were fake or spam-focused, a key metric for understanding Twitter’s ad business. But Twitter claims in a lawsuit against Musk that the billionaire is trying to get out of the deal because his personal fortune has fallen, making it more expensive for him to buy.
As part of Musk’s argument for ending the deal, his attorneys are also seeking to awhich claims Twitter neglected security issues at the company. Twitter has defended itself against this complaint, calling it inaccurate, inconsistent, and out of context.
Here’s what you need to know about the ongoing saga between Musk and Twitter.
Why is Musk trying to end the deal?
Musk seems worried about the future of Twitter’s business, though he said at a TED2022 conference that he doesn’t care about the “economics” of buying Twitter.
Musk’s lawyers allege that Twitter violated parts of the merger agreement and failed to provide the billionaire with the information it requested, including about the social network’s calculations of daily users. Twitter makes most of its money from ad sales, so the number of people who can see ads while on the site is a key metric for the company.
Twitter doesn’t believe Musk’s explanation, alleging in its lawsuit that his requests for information were “intended to thwart the deal.” The company accuses Musk of trying to pull out of the deal because Tesla’s share price has fallen and the purchase has become more expensive for him.
“Musk appears to believe that, unlike any other party subject to Delaware contract law, he is free to change his mind, ruin the company, disrupt its operations, destroy stock value and walk away,” it said in the lawsuit.
Musk’s lawyers also filed a counterclaim against Twitter. The counterclaim alleges that Twitter provided misleading information, leading the billionaire to strike a deal to buy the company at an “inflated price.” Twitter has denied allegations that the company “betrayed” Musk.
Since then, Musk’s lawyers have been trying to get out of the deal with different arguments. In a letter dated August 29, they claimed that Twitter violated the merger agreement by not disclosing Musk’s approval or asking for approval:with Peiter “Mudge” Zatko, Twitter’s former security chief, who filed a whistleblower complaint against the company.
Why did Musk even want to buy Twitter?
Musk is an avid user of the service, but also one of its most vocal critics.
Musk tweeted a poll to his followers in March asking if users believe Twitter protects freedom of expression. He said the poll results, in which about 70% of 2 million respondents answered “no”, were “very important”.
“Given that Twitter serves as a de facto public marketplace, failure to uphold the principles of free speech fundamentally undermines democracy. What should be done?” Musk said in a follow-up tweet. He then made an offer to buy Twitter, noting that he felt Twitter needed to be private to achieve its goal.
The First Amendment guarantee of free speech applies to government censorship, but not to companies like Twitter, which have their own Rules about what is not allowed on their sites.
Musk referenced free speech again when Twitter announced the deal in April. He also said he wants to add new features to Twitter, promising to open source the service’s algorithms, defeat spam bots and authenticate everyone.
“Twitter has tremendous potential,” Musk wrote. “I look forward to working with the company and the user community to unlock it.”
Progressives have criticized social media companies for not taking action against harmful content, such as hate speech and harassment. Conservatives claim her speech is being censored. (Twitter has long denied allegations that it censors conservatives.)
On April 19th Musk tweeted that he believes social media policies are “good when the extreme 10% of left and right are equally unhappy.” He has also said he would reverse the ban who was booted from the platform after the Jan. 6 riots on Capitol Hill over concerns about inciting violence. Trump has said he has no plans to return to Twitter even if the company lifts the ban.
What was the reaction from Twitter?
Twitter says completing the deal is in the best interests of shareholders.
Initially, it seemed like Twitter would turn down the offer, but the board began to take it more seriously when Musk offered details on how he would fund the deal. The company had instituted a defense strategy known as the “poison pill” that would make it harder for Musk to increase his stake in the company. The tactic allowed Twitter to accept a competing offer if one popped up.
Twitter co-founder Jack Dorsey tweeted on April 15 that “as a public company, Twitter has always been ‘for sale.’ that’s the real problem.” As a public company, Twitter has grappled with leadership changes, layoffs, and activist investors. After Twitter announced the deal, Dorsey said he didn’t think anyone should own or operate Twitter, but did take it back from Wall Street is the “right first step”.
“However, to solve the problem of being a corporation, Elon is the only solution I trust,” Dorsey tweeted. “I trust his mission to expand the light of consciousness.”
A filing with the US Securities and Exchange Commission also sheds more light on how the deal came about. Musk spoke with Twitter co-founder Jack Dorsey in March about the future of social media and decentralizing social media to give users more control over their data and the content they see.
Musk’s efforts to take over Twitter have been bumpy. Musk turned down a seat on Twitter’s board of directors before offering to take the company private. Musk also had a conversation with Dorsey in early April, during which Dorsey said he thinks Twitter, a public company, is better off as a private company, the filing shows.
How did Musk plan to pay for Twitter?
Even for Musk, who is worth about $220 billion, buying Twitter requires some financial juggling.
In an initial SEC filing on April 20, Musk said he had personally committed about $21 billion in equity financing. He also secured approximately $25.5 billion in debt financing from Morgan Stanley and other financial institutions.
Since then, Musk has raised capital by selling $8.5 billion worth of Tesla stock, presumably for the deal, and has provided $7.1 billion from outside investors. According to a May 4 filing, those investors include Sequoia Capital and Oracle co-founder Larry Ellison. (Ellison sits on Tesla’s board of directors.) Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Alsaud also agreed to pledge his stake of around 35 million shares in the deal.
On May 24, Musk pledged more equity for the deal. He is now willing to invest $33.5 billion in the acquisition.
What happens next?
Twitter is asking the Delaware Court of Chancery to enforce the deal. A trial is scheduled to take place over five days in October. According to an SEC filing dated Jan.