Twitter and Elon Musk are gearing up for a long legal battle following the decision of the Tesla CEO to back out his $44 billion acquisition deal of the social media company.
Bloomberg reports, citing sources, that Twitter has hired popular legal firm, Wachtell, Lipton, Rosen & Katz LLP to sue Elon Musk over his move to terminate the deal. Musk has also hired Quinn Emanuel Urquhart & Sullivan LLP, another high-profile law firm that successfully won a defamation trial for the billionaire back in 2019.
The law firm representing Twitter specializes in merger litigation and is said to have connections to the Delaware court system, where the case will be tried. Twitter plans to file a lawsuit against the Tesla CEO early this week, the sources told Bloomberg.
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The acquisition deal, which started in April, has dragged along many hurdles, including initial attempt by Twitter board to stop it from going through.
On Friday, Musk notified Twitter of his intention to back out of the deal on the excuse that platform thrives on fake accounts. He had earlier requested that the social media platform provide proof to back up its claim that bot or spam accounts make up less than 5% of users.
Though Twitter provided Musk with “firehose”, a repository of raw data on hundreds of millions of daily tweets, Musk was unsatisfied with the result and announced that he is not proceeding with the deal.
Twitter’s board reiterated, in a statement on Friday, its commitment to see the deal through and vowed that it will meet Musk in court.
“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement,” tweeted Twitter’s chairman, Bret Taylor. “We are confident we will prevail in the Delaware Court of Chancery.
The legal tussle will be centered on the $1 billion breakup fee that Musk is required to pay under the deal, unless he finds genuine reasons to halt the acquisition.
In a letter to Twitter’s Chief Legal Officer Vijaya Gadde, Musk’s lawyers argue that his decision not to look at the numbers before signing the merger agreement did not waive his right to inspect this information. They said in addition that Musk’s analysis so far shows a volume of spam accounts that is “wildly higher than 5%”, which contradicts Twitter’s claim in its financial reports.
There are speculations that Musk is retreating from the deal to save Tesla from the dips that have characterized the electric vehicle company since the deal was announced in April. And it may be a strategy for him to get a lower deal. Musk offered $54.20 per share in cash for the acquisition.
Legal experts said the two parties will be heading into a long legal showdown that may cost Musk billions of dollars.