Twitter sues Elon Musk for backing out of $44 billion merger

Elon Musk

Twitter has sued Elon Musk, hoping to force the billionaire to buy the social media platform at the agreed price of $54 per share.

As Bret Taylor, chairman of the board at Twitter, suggested on Monday, Twitter has sued Musk after he called off the $44 billion deal.

"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," read the lawsuit, spotted by Reuters.

In April, Twitter announced that it has accepted Elon Musk's offer to purchase the company for $44 billion, for $54.20 a share.

In May, Musk announced that he would temporarily halt his purchase of the social media while he sought to confirm how many accounts on the platform were spam accounts.

The Tesla CEO claimed that he would walk away from the deal if fake accounts comprised more than 5% of Twitter's total user base.

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38 Comments

22july2013

said about 1 year ago

I was wondering what laws may apply to people who "pump and dump", and I found this on the Internet. I'm not saying that Musk is guilty. I have no idea. In fact, Twitter itself could be guilty of one of these laws. In addition to all these laws, there's also the question of "contract violation" which would have to be resolved in civil court, or be settled out of court.

There are a variety of laws that make pump and dump illegal including:
Section 17(A) of the Securities Act of 1933: The Securities Act prohibits anyone involved in selling or offering securities to participate in a scheme to defraud. Section 17(A) specifically criminalizes making material misstatements, omitting material facts, or otherwise participating in a scheme to defraud potential purchasers of securities.
Rule 10b-5 of the Securities Exchange Act of 1934: The Securities Exchange Act broadly prohibits any fraud, material misstatements, or material omissions in connection with the purchase or sale of securities.
18 U.S. Code Section 1343: This wire fraud statute criminalizes any fraud scheme that uses wire, radio, or television communications. If the Internet is used as part of a pump and dump scheme or if faxes are sent out to pump a stock, you can be charged with this offense.
18 U.S. Code Section 1341: This statute broadly prohibits fraud and swindles, including fraud schemes using the postal service. If false reports about the company or other marketing materials were sent via mail, you may be charged with postal fraud.

netrox

said about 1 year ago

If Elon Musk asked for bot account and Twitter failed to provide that, then I don't see how it's illegal or how he can be sued.

It's same with buying a house, a buyer want to have the house inspected and all questions answered before full purchase begins. If the seller fail to provide everything the buyer ask for, the seller has no right to sue.

sconosciuto

said about 1 year ago

Except he’s not buying a house so your analogy falls flat on its face.

I would be shocked if Twitter hadn’t covered this exact contingency in the contract.

Occam’s Razor says this is simply a sociopathic billionaire (but I repeat myself) trying to back out of a bad deal he made.

Stabitha_Christie

said about 1 year ago

netrox said:

If Elon Musk asked for bot account and Twitter failed to provide that, then I don't see how it's illegal or how he can be sued.

It's same with buying a house, a buyer want to have the house inspected and all questions answered before full purchase begins. If the seller fail to provide everything the buyer ask for, the seller has no right to sue.

Not exactly, Musk and Twitter signed a contract and that becomes the governing document for the deal. As part of the deal Musk waived his right to due diligence. Per your analogy that would be like making an offer for a house and waiving your right to have it inspected. Per the contract he did have the option to drop out of the deal for no reason but only if he paid Twitter a billion dollars. He is trying to get out of the deal without paying the billion and using bots as the reason but waiving his right to due diligence is what will potentially sink him here. Correction, he doesn't have a billion dollar exit option, the contract allows Twitter to force him to get the financing and close the deal.

emig647

said about 1 year ago

I feel like I missed something. I thought Twitter provided Musk with the firehose of data so his team could detect the number of bots? https://www.nytimes.com/2022/06/08/technology/twitter-musk-firehose-tweets.html

I guess there is some ambiguity around the percentage of bots that get counted towards advertising numbers and that is what Musk is fighting. This could get messy, but I think with Musk waiving his right for Due Diligence he may get burned on this. This whole situation was really bizarre.