Twitter’s shares climb over five per cent in early morning trading after news broke that the social media titan had officially sued Elon Musk to force him to follow through with his $44bn takeover.
Last week the world’s richest man announced that he would be walking away from the mega deal, citing the Silicon Valley’s firm lack of clarity over spam and bot accounts.
Despite Twitter plunging further below Musk’s $54.20 bid this week, Twitter filed a lawsuit in Delaware yesterday, with chairman Bret Taylor stating on Twitter that he wanted to “hold Elon Musk accountable to his contractual obligations”.
The lawsuit said: “Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, [Mr] 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 went on to accuse the serial entrepreneur of pulling out the deal because it “no longer serves his personal interests”, and his exit strategy is “a model of hypocrisy”.
“The value of Mr Musk’s stake in Tesla, the anchor of his personal wealth, has declined by more than $100bn from its November 2021 peak. So [Mr] Musk wants out,” it said.
“Rather than bear the cost of the market downturn, as the merger agreement requires, [Mr] Musk wants to shift it to Twitter’s stockholders,” the lawsuit added.
The argument is that once the market declined and fixed-deal became less attractive, Musk shifted the narrative towards bots.
Following the news of the filing, the Tesla founder tweeted: “Oh the irony lol [laughing out loud]”. He is yet to give an official and direct response to Twitter’s filing.
Weighing in on the case, Lead Equity Analyst at Hargreaves Lansdown Sophie Lund-Yates said: “The eventual outcome of such a case is anyone’s guess, with the story so far not following any rules. One thing’s for sure though – Elon Musk’s immense resources means he will have the ability to throw a lot at fighting the case.”
Musk first acquired a 9.2 per cent stake in Twitter in April, before shortly launching takeover approach on a take-it-or-leave-it basis in an
unsolicited public offer, representing a 38 per cent premium over Twitter’s unaffected share price. Musk personally committed $33.5bn.
Musk has over 100 million followers and is one of the most followed on Twitter, having tweeted more than 18,000 times since he joined in 2009.