As the maxim goes: If at first you don’t succeed, try again. And again. Elon Musk made a third attempt to back out of his messy, ongoing $44 billion acquisition of Twitter on Friday. The company turned around and denied the claim on Monday.
The richest man on Earth alleged that Twitter’s $7 million payout to ex-executive (and to-be whistleblower), Peiter “Mudge” Zatko, following the security head’s departure from the company, was a violation of their Merger Agreement.
In a letter to Twitter filed with the Securities and Exchange Commission, Musk’s legal team wrote:
In Section 6.1(e) the Merger Agreement, Twitter covenanted that between signing and closing it would not “except as required pursuant to existing Company Benefit Plans... grant or provide any severance or termination payments or benefits to any Company Service Provider other than the payment of severance amounts or benefits in the ordinary course of business consistent with past practice and subject to the execution and non-revocation of a release of claims in favor of the Company and its Subsidiaries.” The definition of “Company Service Provider” includes Twitter’s former employees. Under Section 7.2(a) of the Merger Agreement, Defendants are not obligated to close if Twitter has not “performed or complied, in all material respects, with its obligations required under this Agreement.”
In response, the company filed their own letter with the SEC. “As was the case with both your July 8, 2022 and August 29, 2022 purported notices of termination, the purported termination set forth in your September 9, 2022 letter is invalid and wrongful under the Agreement,” Twitter’s lawyers wrote.
The company went on to claim Musk and “Musk Parties” have breached the Merger Agreement multiple times over, and that the purchase contract is still valid. “Twitter again demands that Mr. Musk and the other Musky Parties comply with their obligations under the Agreement,” its lawyers wrote.
Previously, Musk’s legal team tried to void the acquisition by claiming that Zatko’s whistleblower complaint itself violated the terms. And, before that, Musk alleged that the number of bots on the platform was grounds for terminating his Twitter purchase.
Neither attempt proved immediately effective, and Twitter responded to the first by suing Musk in Delaware’s Court of Chancery. In that ongoing suit, the defendants recently successfully petitioned to include Zatko’s complaint in their case. The whistleblower has been subpoenaed to testify in the trial, which is scheduled to last five days beginning October 17.
But (luckily?) we won’t have to wait until then for more Musk/Twitter drama. A special company shareholder meeting is scheduled for Tuesday (i.e. tomorrow) at 10a.m. Pacific/ 1p.m. Eastern. At the meeting, all Twitter stockholders will be asked for vote for or against Musk’s acquisition of the platform. Shareholders stand to gain a lot, if the merger goes through, specifically $54.20 per share in the company, which is hovering around 30% higher than the current market value.
The protracted, highly publicized legal battle between Musk and Twitter has had clear consequences for the company. The unresolved question of whether or not the merger will go through has sent shockwaves through the social media site’s stock values and led to layoffs as well as some employees quitting on their own.