Elon Musk claps back at Twitter’s lawsuit over $44 billion deal

Elon Musk accused Twitter on Friday of deceiving him about its service, obfuscating facts and not notifying him of executive changes, in his first formal response to the company’s lawsuit aimed at forcing him to complete a $44 billion acquisition of the social media service.

Lawyers for Musk, who struck the blockbuster deal to buy Twitter in April but has since tried to terminate the purchase, made the arguments in a legal filing intended to oppose the company’s demand for a four-day trial in September in the case.

Twitter was rushing to court after “a two-month treasure hunt of delays, technical bottlenecks, evasive answers, and, ultimately, refusals,” Musk’s lawyers said in the filing. They added that Twitter was trying to “shroud the truth” over fake accounts on the service, an issue that Musk has made central to his desire to pull out of the deal.

Twitter had requested a September trial because Musk was due to complete his deal to buy the company by Oct. 24. Musk’s lawyers proposed a February date for a trial instead, noting that the deal deadline automatically extends in the event of litigation. The banks that have committed to help fund the deal have promised that financing through April 25, 2023.

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Musk’s legal filing was a forceful rebuke of Twitter’s accusations that he was trying to unjustly end the acquisition. In its lawsuit this week, Twitter said Musk had “knowingly, intentionally, willfully and materially breached” his agreement to buy the company by falsely claiming that he was not getting information about the prevalence of fake accounts on the service.

The ensuing legal battle promises to be ugly and prolonged. The back-and-forth between the two sides had already escalated for weeks before landing in court. Musk has made barbed comments about the company and frequently questioned the prevalence of fake accounts on the platform. Fake accounts are used to spread spam or manipulate Twitter’s service by falsely boosting trends, and are often automated rather than run by real people.

At one point, Musk tweeted that the deal with Twitter was on hold. His actions coincided with a slide in the value of tech shares, including those of Tesla, the electric carmaker that Musk leads and that is the main source of his wealth.

Twitter has maintained that it has worked with Musk to close the deal and is intent on seeing the sale through. In the deal agreement, Twitter and Musk have a so-called specific performance clause that allows the company to sue to force the deal through, as long as the debt that the billionaire has corralled for the acquisition is in place.

In the legal filing, Musk’s lawyers reiterated many of the same arguments they had made earlier this month when the billionaire said he intended to terminate the deal.

Twitter did not conduct a rigorous count of fake accounts and stymied Musk’s efforts to understand how spam was tallied, the filing said. “Musk was flabbergasted to learn just how meager Twitter’s process was,” the filing said, noting that the company used people to figure out the information rather than machine learning.

Musk tried getting more data from Twitter about fake accounts, the filing added, but the company “deliberately erected artificial roadblocks and frustrated defendants’ efforts.”

To determine how Twitter counts fake accounts, Musk needed months of discovery and dozens of depositions, his lawyers said. Musk has contended that Twitter’s public disclosures that fake accounts are around 5% of active users are misleading. Incorrect figures could be a “material adverse effect” under the deal’s terms and allow Musk to walk away, his lawyers said, arguing that the numbers bear “directly on Twitter’s prospective value to users and advertisers.”

Twitter also breached the terms of the deal by recently firing two top executives without warning Musk and not operating business as it normally would, his lawyers said.

The company said in its suit that it had notified Musk’s lawyers about the two executives and that the lawyers had “raised no objection.”

Twitter and Musk are scheduled for a hearing on the case Tuesday at Chancery Court in Delaware, where the company filed its lawsuit against the billionaire. The chancellor of the court, Kathaleen St. J. McCormick, has been assigned to oversee the case, and will decide whether to speed the case along, as Twitter has requested, or delay it for Musk.

If the suit moves to trial, McCormick will determine whether Musk must close the deal. She could also let Musk walk away while forcing him to pay damages. By many readings of Twitter’s contract with Musk, damages would be capped at $1 billion. The two sides might also settle or renegotiate the deal.

Twitter has lost about one-third of its value since Musk signed the deal to buy the company for $54.20 a share. The company is scheduled to report its quarterly earnings July 22.