Lawyers for Mr Musk, who closed the blockbuster deal to buy Twitter in April but has since sought to end the purchase, made the arguments in a legal filing intended to oppose the company’s request for a four-day trial in September for the case. Twitter is rushing to court after “a two-month treasure hunt of delays, technical gridlock, evasive answers and, ultimately, denials,” Mr. Musk’s lawyers said in the filing. They added that Twitter was trying to “cover the truth” over fake accounts on the service, an issue that Mr. Musk has made central to his desire to exit the deal. Twitter had requested a trial in September because Mr. Musk was due to complete his deal to buy the company by Oct. 24. Mr. Musk’s lawyers proposed a February trial date instead, noting that the agreement’s deadline is automatically extended in the event of a lawsuit. Banks committed to helping finance the deal have pledged that funding by April 25, 2023. Mr. Musk’s legal filing was a strong rebuke of Twitter’s accusations that it was trying to end the acquisition unfairly. In its lawsuit this week, Twitter said Mr Musk had “knowingly, willfully, willfully and materially breached” its agreement to buy the company by falsely claiming it had not received information about the prevalence of fake accounts on the service.
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The ensuing legal battle promises to be ugly and protracted. The back-and-forth between the two sides had already been escalating for weeks before it landed in court. Mr Musk has made barbed comments about the company and often questions the prevalence of fake accounts on the platform. Fake accounts are used to spread spam or manipulate the Twitter service by falsely boosting trends, and are often automated rather than operated by real people. At one point Mr. Musk tweeted that the deal with Twitter was on hold. His actions coincided with a slide in the value of technology stocks, including those of Tesla, the electric car maker that Mr Musk leads and which is the main source of his wealth. Twitter has maintained that it has worked with Mr Musk to close the deal and intends to complete the sale. In the deal agreement, Twitter and Mr. Musk have a so-called special performance clause that allows the company to sue to force the deal as long as the debt the billionaire has associated with the buyout exists. A Twitter spokesman declined to comment. Ann Lipton, a professor of corporate governance at Tulane Law School, said it was clear why Twitter was moving and Mr. Musk was not. “Twitter’s board has every interest in getting this resolved quickly and has every interest in delaying — time is money,” he said. For Mr. Musk, he added, “He’s going to want to get as much discovery as possible and take as much time as possible, it’s really going to depend on the threat of the trial itself and, as time goes on, the uncertainty associated with that . force some sort of settlement or retreat.” In the legal filing, Mr. Musk’s lawyers repeated many of the arguments they had made this month when the billionaire said he intended to end the deal. Twitter did not rigorously count fake accounts and hindered Mr. Musk’s efforts to understand how to count spam, the filing said. “Musk was surprised to learn how lean Twitter’s process was,” the filing said, noting that the company used humans to understand the information, not machine learning. Mr. Musk tried to get more data from Twitter about fake accounts, the filing added, but the company “deliberately erected artificial roadblocks and thwarted the defendants’ efforts.” To determine how Twitter counts fake accounts, Mr. Musk needed months of discovery and dozens of depositions, his lawyers said. Mr Musk argued that Twitter’s public disclosures that fake accounts make up about 5% of active users are misleading. The incorrect figures could be a “material adverse effect” under the terms of the deal and allow Mr. Musk to leave, his lawyers said, arguing that the numbers “directly affect Twitter’s prospective value to users and advertisers”. Twitter has made mistakes with its user numbers in the past, Mr. Musk’s lawyers said. In April, the company said it had overcounted its active users from 2019 to 2021. The company said in its lawsuit that it had informed Mr. Musk’s lawyers about the two executives and that the lawyers “had not objected.” Twitter and Mr. Musk are scheduled for a hearing on the case on Tuesday in Chancery Court in Delaware, where the company filed its lawsuit against the billionaire. The chancellor of the court, Kathaleen St. If the lawsuit goes to trial, Judge McCormick will decide whether Mr. Musk should close the deal. It could also let Mr Musk walk away while forcing him to pay damages. Under many readings of Twitter’s contract with Mr. Musk, damages would be limited to $1 billion. The two sides may also settle or renegotiate the deal. Twitter has lost about a third of its value since Mr. Musk signed the deal to buy the company for $54.20 a share. The company is scheduled to report its quarterly earnings next Friday.
