Twitter sues Elon Musk for terminating $44bn acquisition deal

Social media network company, Twitter, has hired an elite law firm Wachtell, Lipton, Rosen & Katz to take a legal action against the world’s richest man, Elon Musk.

Twitter’s preparation to sue Musk was based on his move to terminate his $44 billion acquisition of the social media company.

According to Financial Times, the San Francisco company is preparing to file its lawsuit with the Delaware Court of Chancery against Musk early this week.

Musk said on Friday that he intended to end his initial deal of buying Twitter, mentioning three breaches of the merger agreement by the social media platform.

In reaction, Twitter vowed to hold the billionaire to his original deal terms and price of $54.20 per share, in what could develop into a terrible legal fight that would dictate the future of the company.

Wachtell Lipton has the leading litigation practice in Delaware, where the majority of US public companies are incorporated. It defends companies in lawsuits over breach of fiduciary duty and broken merger agreements in the state.

The firm had initially defended Musk in a shareholder lawsuit brought in Delaware by Tesla shareholders who alleged that Musk had improperly bailed out SolarCity, another piece of his empire, when Tesla acquired the clean energy company in 2017.

Earlier this year, Musk was cleared by a Delaware judge of any wrongdoing in that case. He was represented by the law firm Cravath, Swaine & Moore in the 2021 trial.

Twitter declined to comment on Wachtell’s appointment, which was first reported by Bloomberg. Wachtell did not immediately respond to a request for comment.

In a regulatory filing on Friday, Musk’s team argued that Twitter had failed to provide enough information to prove that the number of fake and spam accounts on its platform stands at less than 5 per cent, as it has long estimated.

Twitter, which denies Musk’s claims, has an incentive to push the deal through or extract a larger break fee from Musk than the $1 billion already agreed.

Its share price has declined by more than 30 per cent since the Tesla chief made his offer and no other buyers have emerged.

The company has been plunged into crisis, announcing mass lay-offs and cost-cutting measures in recent weeks. Among remaining employees, morale is low because of job uncertainty and division over whether Musk, who promised to bring a “free speech” ethos to the platform, should run it.

Twitter is likely to argue that Musk’s concerns simply mask buyer’s remorse over a pricey and highly leveraged deal, amid a broader rout in tech stocks.

It is an interpretation shared by many analysts and legal experts.

“We see Elon Musk’s unsubstantiated claims that (Twitter) is misleading investors about the (percentage) of fake accounts as an excuse to back out of the deal,” Brent Thill, equity analyst at Jefferies, wrote on Sunday in a research note.