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Clash Of The Titans: Legal Fight Brewing Over Elon Musk’s Decision To Terminate The Twitter Purchase Agreement

July 15, 2022

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<p style="text-align: justify;">A high-profile legal fight has begun over the recent decision by Elon Musk to back out of purchasing Twitter. On July 8, 2022, Musk advised Twitter of his plans to terminate their purchase agreement, claiming that Twitter was in “breach of multiple provisions” of the original $44 billion agreement. Musk claimed that Twitter failed to provide adequate data regarding the number of fake accounts and bots, and how the number of daily users is calculated given the quantity of spam accounts on the social media platform. Musk had previously stated that the deal would not move forward without this data since Twitter’s revenue is generated primarily by ad sales. Musk also claimed that Twitter fired key employees and instituted a general hiring freeze without Musk’s approval.</p>
<p style="text-align: justify;">Twitter denied Musk’s allegations, claiming that it has complied with its legal obligations under the agreement and that Musk’s attempt to terminate the agreement is invalid and constitutes a breach of his obligations under the agreement. On July 12, 2022, Twitter filed suit against Musk in the Delaware Chancery Court, the preeminent court in the nation for corporate takeover and merger disputes.</p>
<p style="text-align: justify;">In its lawsuit, Twitter seeks to force Musk to follow through with the deal. The lawsuit is unusual in that it contains memes, tweets and emoji, and claims that Musk has “knowingly, intentionally, willfully, and materially breached the Agreement.” The suit also criticizes Musk’s strategy in backing out of the deal as a “model of bad faith” and that he repeatedly disparaged the company even after signing the purchase agreement.</p>
<p style="text-align: justify;">Several reports claim that Twitter’s CEO Parag Agrawal is “willing to go to war” to make sure the agreement with Musk is upheld. Unless a settlement is reached, the parties will likely engage in contentious litigation to resolve whether the agreement should move forward or Twitter is entitled to damages, including a $1 billion termination fee in the agreement. How the Delaware court interprets the actions and intentions of Twitter and Musk, coupled with the language of the agreement, will determine the outcome of this high stakes dispute, and could impact large merger agreements moving forward. Time will tell how this legal fight will play out.</p>
<p style="text-align: justify;">Thank you to Michelle Palagi for her contribution to this post. Please contact <a href="mailto:agibbs@wcmlaw.com">Andrew Gibbs</a> with any questions.</p>

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