Social media giant Twitter is suing billionaire Elon Musk in an effort to force him to complete his US$44 billion ($70b) takeover of the company.
Musk reached a deal to buy Twitter back in April, agreeing to purchase all its shares for US$54 ($88) each.
But late last week, Musk's lawyers wrote to Twitter and said he was "terminating" the merger agreement, accusing the company of breaching its terms.
The world's richest man specifically accused Twitter of "resisting and thwarting" his attempts to access information about fake accounts. Musk claims up to 20 per cent of Twitter's 229 million users could be fake; the company insists the true figure is about 5 per cent.
In response to the letter, Twitter chairman Bret Taylor signalled his company would take Musk to court. That legal fight has now arrived.
"In April of 2022, Elon Musk entered into a binding merger agreement with Twitter, promising to use his best efforts to get the deal done. Now, less than three months later, Musk refuses to honour his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests," states the company's lawsuit, filed in the Court of Chancery in the state of Delaware.
"Having mounted a public spectacle to put Twitter in play, and has proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he is free to change his mind, trash the company, disrupt its operations, destroy stockholder value and walk away.
"Twitter brings this action to enjoin Musk from further breaches, to compel Musk to fulfil his legal obligations, and to compel consummation of the merger."
Twitter accuses Musk of trying to ditch the deal because of a fall in the stock market and the consequent hit to his wealth, rather than any genuine concerns about fake accounts.
"After the merger agreement was signed, the market fell," it notes.
"The value of Musk's stake in Tesla, the anchor of his personal wealth, has declined by more than US$100b [$163b] from its November 2021 peak. So Musk wants out. Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter's stockholders.
"[This] tracks with the disdain he has shown for the company that one would have expected Musk, as its would-be steward, to protect."
The lawsuit goes on to call Musk's exit strategy "a model of hypocrisy".
Twitter in downtown San Francisco. Photo / Getty Images
Musk's stated reason for ditching the deal
In his legal team's letter, addressed to Twitter's chief legal officer Vijaya Gadde, Musk's lawyers argued the company had breached its obligation to provide him with the information he had requested "for any reasonable business purpose related to the consummation of the transaction".
"Twitter has not complied with its contractual obligations. For nearly two months, Musk has sought the data and information necessary to 'make an independent assessment of the prevalence of fake or spam accounts on Twitter's platform'. This information is fundamental to Twitter's business and financial performance and is necessary to consummate the transaction," lawyer Mike Ringler wrote.
"Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Musk's requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Musk incomplete or unusable information."
He said Musk had made "numerous follow-up requests" aimed at "filling the gaps in the complete information Twitter provided".
"In short, Twitter has not provided information that Musk has requested for nearly two months notwithstanding his repeated, detailed clarifications intended to simplify Twitter's identification, collection and disclosure of the most relevant information sought.
"As Twitter has been on notice of its breach [of the merger agreement] since at least June 6, any cure period offered to Twitter under the agreement has now lapsed. Accordingly, Musk hereby exercises [his] right to terminate the agreement and abandon the transaction contemplated thereby."
Musk has accused Twitter of foiling his efforts to access information about fake accounts. Photo / Getty Images
Taylor, the Twitter chairman, responded with a brief statement.
"The Twitter board is committed to closing the transaction on the price and terms agreed upon with Musk and plans to pursue legal action to enforce the merger agreement," Taylor wrote in a social media post, retweeted by Twitter CEO Parag Agrawal.
"We are confident we will prevail in the Delaware Court of Chancery."
