Twitter has hired the elite law firm Wachtell, Lipton, Rosen & Katz as it prepares for a legal battle against Elon Musk, who has moved to complete 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 Delaware Court of Chancery against Musk earlier this week, one person said.
Musk said Friday that he planned to abandon his deal to buy Twitter, citing three breaches of the merger agreement from the social media platform.
In response, Twitter promised to keep the mercurial billionaire to its original terms and conditions of $ 54.20 per share, in what could develop into a messy legal battle that would dictate the company’s future. *
Wachtell Lipton may have the leading litigation in Delaware, where the majority of U.S. public companies are incorporated. It defends companies in lawsuits over breaches of fiduciary duty and breached merger agreements in the state.
The company had originally defended Musk in a shareholder lawsuit filed in Delaware by Tesla shareholders who claimed that Musk had mistakenly rescued SolarCity, another part of the Musk empire, when Tesla acquired the clean energy company in 2017.
Earlier this year, Musk was cleared by a Delaware judge for any offense in that case. He was represented by the law firm Cravath, Swaine & Moore in the trial in 2021.
Twitter declined to comment on Wachtell’s appointment, which was first reported by Bloomberg. Wachtell did not immediately respond to a request for comment.
In a regulatory submission on Friday, Musk’s team claimed that Twitter had not provided enough information to prove that the number of fake accounts and spam accounts on their platform is below 5 percent, as it has long estimated.
The submission claimed that the true number could in fact be “wildly higher”, which indicates that the company had made false statements in its regulatory registrations. It also accused Twitter of failing to comply with its commitment to “conduct its business in an ordinary manner”, by firing several senior executives after the deal was signed.
Twitter, which rejects Musk’s claims, has an incentive to force the deal through or pull out a larger break from Musk than the $ 1 billion already agreed. The share price has fallen by more than 30 percent since the Tesla boss made his offer, and no other buyers have appeared.
This is because the company has been thrown into a crisis, and has announced mass redundancies and cost-saving measures in recent weeks. Among the remaining employees, morale is low due to job insecurity and division over whether Musk, who promised to bring a “freedom of speech” ethos to the platform, would control it.
Twitter is likely to argue that Musk’s concerns simply mask the buyer’s remorse over a costly and highly leveraged deal, in the midst of a broader route in technology stocks.
It is an interpretation shared by many analysts and legal experts.
“We see Elon Musk’s unfounded allegations about it [Twitter] are misleading investors about [percentage] of false accounts as an excuse to withdraw from the agreement, “wrote Brent Thill, equities analyst at Jefferies, Sunday in a research note.
Twitter has long published the figure of 5 percent, “makes us question the validity of Musk’s concerns,” he added.
Eric Talley, a law professor at Columbia, said Musk’s arguments were “particularly thin”, given that Twitter’s revelations about fake accounts note that they are estimates.
He added that while a pact in the merger agreement states that Twitter must comply with information requests within reasonable limits, the company will be able to argue that sharing large amounts of private user data does not qualify.
“[The requests] is just not going to last, he said.
“This may well be in part a negotiation strategy to try to threaten. . . that this is going to be such a torturing process in court that they might as well accept either a settlement or a reduced price to move on. “
Additional reporting by Alexandra Scaggs in New York
* This story has been changed to correct the agreed selling price