Musk offers to end legal battle, pay $44B to buy Twitter

Elon Musk, Tesla’s CEO, attends the opening of the Tesla Berlin Brandenburg factory in Gruenheide, Germany, on March 22. Trading in shares of Twitter was halted after the stock rose on reports that Elon Musk would go ahead with his $44 billion deal to buy the company after months of legal battles. (Patrick Pleul, Pool via Associated Press)

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NEW YORK – Elon Musk is abandoning his legal battle to back out of buying Twitter by offering to go through with his original $44 billion bid for the social media platform.

The mercurial Tesla chief made the offer in a letter to Twitter, Musk revealed in a filing Tuesday with the US Securities and Exchange Commission.

The offer comes just two weeks before Twitter’s lawsuit trying to force Musk to go through with the deal is due to go to trial in Delaware Chancery Court.

The filing says he will complete the deal as long as he gets debt financing and provided the court gets rid of the lawsuit.

By going through with the deal, Musk essentially gave Twitter what it was seeking from the court — “specific performance” of the contract with Musk, meaning he had to complete the purchase at the original price. The contract Musk signed also has a $1 billion breakup fee.

Eric Talley, a law professor at Columbia University, said he’s not surprised by Musk’s reversal, especially ahead of a planned ouster of Musk by Twitter lawyers starting Thursday that “wouldn’t be comfortable.”

“On the legal basis, his case didn’t look that strong,” Talley said. “It seemed like a pretty simple case of buyer’s remorse.”

If Musk were to lose the lawsuit, the judge could not only force him to close the deal but also impose interest payments that would have increased costs, Talley said.

What surprised Talley is that Musk doesn’t appear to be trying to renegotiate the deal. Even a modest price cut could have given Musk a “moral victory” and the ability to say he got something out of the long-running dispute, Talley said.

News of the renewed offer caused trading in Twitter shares to be halted for much of Tuesday afternoon on the New York Stock Exchange “pending news” after it rose nearly 13% to $47.93. That’s still well below the price of $54.20 in Musk’s original offer. Trading halts are how exchanges give investors a forced timeout when trading in a stock becomes too chaotic or when a company is about to offer market-moving news.

The symbol for Twitter appears above a trading post on the floor of the New York Stock Exchange on Tuesday.  Trading in shares of Twitter was halted after the stock rose on reports that Elon Musk would go ahead with his $44 billion deal to buy the company after months of legal battles.
The symbol for Twitter appears above a trading post on the floor of the New York Stock Exchange on Tuesday. Trading in shares of Twitter was halted after the stock rose on reports that Elon Musk would go ahead with his $44 billion deal to buy the company after months of legal battles. (Photo: Seth Wenig, Associated Press)

Neither Twitter nor Musk’s lawyers responded to requests for comment Tuesday afternoon.

Musk has been trying to back out of the deal for months after signing to buy the San Francisco company in April. Shareholders have already approved the sale, and legal experts say Musk faced a huge challenge defending himself against Twitter’s lawsuit, which was filed in July.

Musk claimed Twitter was undercounting the number of fake accounts on its platform, and Twitter sued when Musk announced the deal was off.

Musk’s argument rested heavily on the claim that Twitter misrepresented how it measures the extent of “spam bot” accounts that are useless to advertisers. Most legal experts believe he faced an uphill battle to convince Chancellor Kathaleen St. Jude McCormick, the court’s chief judge, that something has changed since the April merger agreement to justify overturning the agreement.

Legal experts said Musk may have expected to lose. Things haven’t gone well for him in court recently, with the judge more often ruling in Twitter’s favor on evidentiary issues, said Ann Lipton, an associate professor of law at Tulane University. The judge denied several of Musk’s discovery requests, Lipton said.

It’s also possible that Musk’s co-investors in the deal were getting nervous about how the deal was going, she said.

Musk’s main argument for terminating the deal — that Twitter misrepresented how it measured its “spam bot” problem — also didn’t appear to go down well, as Twitter had been working to pick apart Musk’s attempts to get third-party data scientists to bolster his concerns .

Twitter now has options in the case and doesn’t necessarily have to accept a new offer from Musk, said Robert Anderson, a law professor at Pepperdine University.

“Twitter may still be concerned that the same thing could happen again without additional security,” Anderson said. “They want some certainty that the deal will happen immediately.”

Columbia’s Talley said he would insist that Musk put money into an escrow account until the deal is completed. Such an account could contain cash and/or Twitter stock, as a demonstration of good faith by Musk, Talley suggested.


On the legal grounds, his case didn’t look that strong. … It seemed a bit like a fairly simple case of buyer’s remorse.

–Eric Talley, law professor at Columbia University


Mysteriously, neither Musk nor Twitter CEO Parag Agrawal has written anything about the deal on Twitter, where many developments in the dispute have been aired. Many of Musk’s tweets in the past 24 hours have been about a divisive proposal to end Russia’s invasion of Ukraine, which irked Ukrainian President Volodymyr Zelenskyy.

Musk argued in a tweet on Monday that, in order to achieve peace, Russia should be allowed to keep the Crimean peninsula, which it captured in 2014. He also said Ukraine should adopt a neutral status and drop an offer to join by NATO following Russia’s partial mobilization of reservists.

If the deal goes through, Musk could be stuck with a company he has damaged with repeated statements denouncing fake accounts, Susannah Streeter, senior market analyst for Hargreaves Lansdown in the U.K., wrote in an investor note. “This is an important target seen as key to future revenue streams via paid advertising or for subscriptions to the site, and his relentless scrutiny of Twitter’s numbers over the past few months is likely to raise questions from potential advertising partners,” she wrote.

Reports of the settlement emerged just hours after Musk’s lawyers filed a motion late Monday night seeking sanctions against Twitter for allegedly instructing whistleblower Peiter “Mudge” Zatko in June to destroy evidence. In a proposed ruling, Musk’s lawyers said that “an adverse inference is drawn against the plaintiff that all destroyed evidence corroborates Mr. Zatko’s testimony.”

If Musk were to lose, among the remedies that would favor Twitter is a court order to enforce the deal. Last year, the Chancery Court forced the private equity firm Kohlberg & Co. to go through with its $550 million acquisition of DecoPac, a Minnesota-based company that bills itself as the world’s largest supplier of cake decorating supplies to professional decorators and bakeries. The case was emblematic of the court’s common – but not uniform – decision to enforce contractual obligations on buyers.

Other options include Musk being forced to pay the breakup fee agreed to by each side if it is deemed responsible for the deal falling through. Or he might have to pay a larger amount without actually buying the company for $44 billion.

Contributors: Marcy Gordon

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