Twitter Hits Back at Elon Musk over Breach of Obligations

Elon Musk

Twitter fired back at Elon Musk on Monday, accusing him of “knowingly” breaching an agreement to buy the social media company, just days after the Tesla Inc CEO attempted to back out of the $44 billion deal.

Twitter stated in a letter to Musk dated Sunday and filed with regulators on Monday that it had not breached its obligations under the merger agreement, as Musk indicated on Friday in his decision to terminate the deal.

“Twitter has not experienced and is unlikely to experience a Company Material Adverse Effect,” it added.

The company had planned to sue Musk to force him to complete the transaction, a threat Musk dismissed on Monday. According to people familiar with the situation, Twitter plans to file a lawsuit in Delaware early this week.

Twitter also stated in the letter that the merger agreement was still in place and that it would take steps to complete the transaction.

On Monday, Twitter’s stock closed down 11.3 percent at $32.65 per share, a 40% discount to Musk’s $54.20 bid and the largest daily percentage drop in more than 14 months. In extended trading, they gained about 1%.

“The board of Twitter must consider the potential harm to its employee and shareholder base of any additional internal data exposed in litigation,” said Benchmark analyst Mark Zgutowicz.

According to Francis Pileggi, a corporate litigator with Lewis Brisbois in Delaware, if Musk defends against Twitter’s lawsuit by claiming the company misrepresented the number of fake accounts, he could put bots front and center in the litigation, AFP reports.

“I’d be surprised if he can’t get that information,” Pileggi said.

Pileggi believes that if the number of fake accounts exceeds Twitter’s estimate of 5%, it could lead to price negotiations for the social media platform.

According to legal experts, the 16-year-old social media company has a strong legal case against Musk, but it may choose renegotiation or settlement over a lengthy court battle.

“We believe Elon Musk’s intention to terminate the merger is based on the recent market sell-off rather than Twitter’s ‘failure’ to comply with his requests,” Jefferies analyst Brent Thill wrote in a note.

“We would not be surprised if the stock found a floor at $23.5 in the absence of a deal.”

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