Musk made the proposal in a letter to Twitter, offering to close the deal at the $54.20 per share price, according to an SEC filing by Twitter Tuesday. That came two weeks before a trial was scheduled to begin Oct. 17 in Delaware Chancery Court to hear the lawsuit Twitter filed to force Musk to abide by the original offer price (and Musk’s counterclaims).
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On Oct. 3, Musk’s lawyers sent a letter to Twitter notifying the company that he “intends to proceed to closing of the transaction contemplated by the April 25, 2022 Merger Agreement, on the terms and subject to the conditions set forth therein and pending receipt of the proceeds of the debt financing contemplated thereby,” according to the filing. The buyout agreement is conditioned on the Delaware Chancery Court entering an immediate stay of Twitter’s lawsuit against Musk seeking to complete the deal.
“The intention of the company is to close the transaction at $54.20 per share,” Twitter said in a statement.
Since early July, the CEO of Tesla and SpaceX had been trying to extricate himself from the deal, citing among other objections his allegation that Twitter has been unable to prove its claim that less than 5% of active users represent bots or spam accounts. Twitter had sued Musk, the world’s richest individual, to hold him to the terms of the binding agreement reached in April.
Now Musk has thrown in the towel on his legal battle, a concession that he was likely to lose the case.
Even so, according to the letter from Skadden, Arps, Slate, Meagher & Flom, which is representing Musk in the Twitter transaction, Musk has reserved the right “to assert the defenses and counterclaims” pending in the case before the Delaware court, “including in the event the [lawsuit] is not stayed, Twitter fails or refuses to comply with its obligations under the April 25, 2022, Merger Agreement or if the transaction contemplated thereby otherwise fails to close.”
Musk’s reversal in agreeing to go forward with the Twitter deal at the original terms was reported earlier Tuesday by Bloomberg and other outlets. Twitter’s stock price shot up as much as 18% Tuesday after the Bloomberg report, before trading was halted at about 12:13 p.m. ET. Trading resumed at about 3:38 p.m. ET, whereupon Twitter shares quickly vaulted up to close at $52.01 per share.
Musk, a Twitter power user who is famous for sharing memes and jokes on the platform, was originally enthusiastic about the prospect of owning his favorite social network. He had proposed ideas like authenticating all users and charging businesses to use the social network. Twitter’s lawyers have alleged Musk got cold feet after his personal net worth dropped with the decline in Tesla’s stock price.
The Musk team first told Twitter in July that he was exiting the deal because the company allegedly could not prove its claim that spam and fake accounts are less than 5% of active users. In a letter last month, Musk’s lawyers cited allegations by with Peiter “Mudge” Zatko — its former head of security who was fired in January — about security deficiencies and other problems at Twitter as additional evidence that the pact to buy Twitter was null. In a subsequent letter to Twitter, Musk’s lawyers cited the company’s severance payments to Zatko and his counsel totaling $7.75 million, which they claimed violated a provision of the acquisition agreement under which Twitter agreed to not “grant or provide any severance or termination payments or benefits” without first getting approval from Musk.
Twitter investors obviously wanted Musk to keep his word and pay the $44 billion he promised. At a special meeting of Twitter shareholders, investors overwhelmingly voted in favor of approving Musk’s takeover, which the company noted marked the final closing requirement.
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