Making it official, Twitter sued Elon Musk on Tuesday for pulling out of the $44 billion dollar deal to buy the social media platform.
The lawsuit, filed in the Delaware Court of Chancery, will likely set the stage for a drawn-out legal battle as the company seeks to have Musk follow through on the acquisition, or, alternatively, require him to pay the $1 billion break-up fee outlined in the original agreement.
“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,” the lawsuit says.
“This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business. Twitter brings this action to enjoin Musk from further breaches, to compel Musk to fulfill his legal obligations, and to compel consummation of the merger upon satisfaction of the few outstanding conditions.”
While the news that Musk, the world’s richest person, was pulling out of the deal immediately sparked discussion about how his attempted exit would change the future of free speech on the platform, legal observers suggest that the company has a strong case and that Musk may have to follow through on the deal after all.
Twitter’s legal action comes after Musk agreed to buy the company in April. The status of the deal has been up in the air for weeks, as the Tesla CEO’s public comments about spam accounts have raised questions about his next moves.
His lawyer alleged in a letter on Friday that the company was in “material breach” of “multiple provisions” of the initial agreement, accusing Twitter of withholding data that Musk requested to analyze the number of bot and spam accounts on the platform. Outside lawyers have said there’s little merit to those claims.
In Tuesday’s lawsuit, Twitter acknowledged the fall of the market after Musk finalized the deal. The company’s stock fell sharply on Monday, though it regained about 4 percent on Tuesday. It’s still trading nearly $20 below his offering price.
“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,” the lawsuit says. “Since signing the merger agreement, Musk has repeatedly disparaged Twitter and the deal, creating business risk for Twitter and downward pressure on its share price.”