Twitter has hired elite law firm Wachtell, Lipton, Rosen & Katz as it gets ready for a legal battle against Elon Musk, who ended his $44 billion acquisition of the social media company, According to two people familiar with the situation.
The San Francisco Company is preparing to file a lawsuit in the Court of Chancery Delaware against Musk earlier this week, one of the people said.
On Friday, Musk said he intends to walk away from the deal to buy Twitter, citing the social networking platform’s breach of three merger agreements.
Reply, Twitter vowed to keep the nimble billionaire on the terms of the original deal and a price of $54.20 per share, in conditions that could develop into a messy legal battle that will determine the future of the company. company. *
Wachtell Lipton is perhaps the leading litigator in Delaware, where the majority of US public companies are incorporated. It protects companies in lawsuits over breach of fiduciary duties and broken merger agreements in the state.
The company initially defended Musk in a shareholder lawsuit brought by Tesla shareholders in Delaware, who allege that Musk improperly bailed out SolarCity, another part of Musk’s empire, when Tesla bought clean energy company in 2017.
Earlier this year, Musk was cleared of any wrongdoing by a Delaware judge in that case. He is represented by law firm Cravath, Swaine & Moore in the 2021 trial.
Twitter declined to comment on Wachtell’s appointment, first reported by Bloomberg. Wachtell did not immediately respond to a request for comment.
In a regulatory filing on Friday, Musk’s team argued that Twitter did not provide enough information to prove that the number of fake and spam accounts on its platform was less than 5%, as they have long estimated.
The filing alleges that the actual number could be “much higher,” suggesting the company made false statements in its legal filings. It also alleges Twitter failed to comply with its obligation to “conduct its business in accordance with normal procedures,” by firing several senior employees after the deal was struck.
Twitter, which denied Musk’s claims, had an incentive to push the deal through or extract a larger breakout fee from Musk than the $1 billion agreed upon. Its stock price has dropped more than 30% since the Tesla chief made his offer, and no other buyers have turned up.
It comes as the company has fallen into crisis, announcing mass layoffs and cost-cutting measures in recent weeks. Among the remaining employees, morale is low because of job uncertainty and divisions over whether Musk, who has promised to bring a “free speech” ethos to the platform, should run it. .
Twitter is likely to argue that Musk’s concern is simply masking buyer remorse for an expensive and highly leveraged deal, amid broader tech stock trends.
That is the interpretation shared by many analysts and legal experts.
“We see Elon Musk’s baseless claims that [Twitter] are misleading investors about [percentage] Brent Thill, equity analyst at Jefferies, wrote Sunday in a research note.
Twitter has long made its 5% figure public, “making us question the relevance of Musk’s concerns,” he added.
Eric Talley, a law professor at Columbia, said Musk’s arguments were “particularly thin,” as Twitter’s revelations of the fake accounts noted they were only estimates.
He added that while a covenant in the merger agreement states that Twitter must comply with information requests within reasonable limits, the company would be able to argue that sharing a lot of private user data fourth is not eligible.
“[The requests] just won’t pass the set,” he said.
“This may be partly a bargaining strategy to try to intimidate. . . that it will be such an arduous process that they may just accept a deal or a reduced price to move on. “
Additional reporting by Alexandra Scaggs in New York
* This story has been edited to fix the agreed selling price
