Twitter sued Elon Musk on Tuesday for violating the $44 billion deal he signed to buy the tech company, calling his exit strategy “a model of hypocrisy,” court documents showed.
The lawsuit, filed in the US state of Delaware, asks the court to order the billionaire to close his deal to buy Twitter, arguing that no monetary penalty can repair the damage he caused.
“Musk’s conduct merely confirms that he intends to escape the binding contract he voluntarily signed and harm Twitter in the process,” the lawsuit reads. “Twitter has suffered irreparable harm from the defendants’ violations and will continue to do so.”
The social media company’s stock was up slightly in after-hours trading when the news broke.
Legal experts and market analysts see Twitter as a strong foothold in court, Wedbush analyst Dan Ives said in a note to investors.
“This will be a Game of Thrones court battle with the fake account/bot issue, but ultimately the Twitter board put Musk’s feet in the fire to close the deal at the agreed price,” Ives said.
“Overall, this has been a black eye for Musk and a horror film for Twitter (and its staff) with no winners since the soap opera began in April.”
After weeks of threats, Musk pulled the plug on the deal last week, accusing Twitter of “misleading” statements about the number of fake accounts, according to a letter from his attorneys contained in a US securities filing.
In his first public statements since the announcement, Musk took to Twitter over the weekend to troll the company after it said it would sue to enforce the deal.
“They said I couldn’t buy Twitter. Then they would not disclose bot information. Now they want to force me to buy Twitter in court. Now they have to disclose bot information in court,” he wrote in a tweet, which included pictures of Musk laughing with delight.
The termination of the acquisition agreement sets the stage for a potentially lengthy court battle with Twitter, which initially opposed a transaction with the unpredictable billionaire entrepreneur.
Twitter has defended its oversight of fake accounts and vowed to force Musk to complete the deal, which included a $1 billion breakup fee.
– ‘Bent Back’ –
The social network says the number of fake accounts is less than five percent, a number questioned by Musk, who says he believes the percentage is much higher.
“Twitter bent over backwards to provide Musk with the requested information, most notably the full ‘Fire Department’ record that he has been combing for weeks,” the lawsuit reads.
“The defendants’ requests for information were designed from the start to thwart the deal.”
Musk made his unsolicited offer to buy Twitter without asking for spam or fake account estimates, and even sweetened his offer to the board by withdrawing a due diligence condition, the lawsuit said.
The way Musk used a large chunk of his Tesla stock to fund the deal meant that if the electric-carmaker’s stock fell, he would have to add to or sell more of it, according to the lawsuit.
“Not only were there no financing or due diligence terms, but Musk had already secured debt commitments that, along with his personal equity commitment, would be sufficient to fund the purchase,” it said.
Musk’s ability to complete the deal to purchase Twitter before the “drop dead” date of October 24 this year is extremely limited, and completion depends on little more than Twitter shareholder approval and regulatory approvals off, the lawsuit added.
His non-normative behavior comes as little surprise to observers of the Tesla and SpaceX boss after years of statements flouting or testing convention and sometimes provoking crackdowns from regulators.
While Twitter has asked the court to enforce the deal, the company’s legal action could have a variety of outcomes.
“There are a number of possibilities that can come from the Delaware court, including settlement, separation fee paid, forced deal and a variety of other outcomes,” analyst Ives wrote.
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