Twitter filed a long-awaited lawsuit yesterday as it seeks to force Elon Musk to close his $44 billion acquisition of the company. Twitter argues that it has every right to do so under a specific performance provision in the trading agreement.
The company, with the help of lawyers for Wachtell (who has also worked for Musk), set fire to Musk’s efforts to drop the offer, which he argued was more about falling Tesla stock and its effect on Musk’s wealth than anything else.
“Musk is refusing to fulfill his obligations to Twitter and its shareholders because the agreement he signed no longer serves his personal interests,” the company said in the lawsuit, adding: “Musk apparently believes that he, unlike any other party , is subject to Delaware contract law. He – he is free to change his mind, wreck the company, discontinue its operations, destroy shareholder value, and walk away.” (Musk has not responded to a request for comment.)
This is what Twitter said:
The company gave Musk everything and more in spam accounts, Contrary to Musk’s claims that Twitter obstructed his efforts to get the information he needed to close the deal. But even then, Twitter claims, Musk’s demands became increasingly irrational.
“From the beginning, the defendants’ requests for information were designed to try to scuttle the deal,” the suit says. “Musk’s increasingly outlandish requests do not reflect a genuine examination of Twitter’s processes, but rather a litigation-driven campaign to try to create a record of non-cooperation on Twitter’s part.”
Bots do not count as a “material adverse effect” that would justify canceling the deal, despite Musk’s claims that Twitter’s regulatory disclosures, which state that about 5 percent of its accounts are bots, were intentionally misleading. Twitter explicitly said in its regulatory filings that the figures were estimates. And Musk cited solving the problem of spammers and bots as the main reason he wanted to buy Twitter, according to the lawsuit.
On April 9, the day Musk said he wanted to acquire Twitter rather than join its board, he texted Twitter president Bret Taylor to tell him that “the ‘fake user purge’ of the platform had to be done in the context of a private company because he believed it would ‘make the numbers look terrible,’” the suit says.
Twitter conducted its business in “ordinary course,” which means consistent with the way things previously worked. Breaking an “ordinary course” provision has gotten a buyer out of a deal before, notably AB Stable’s acquisition of MAPS Hotels and Resorts during the height of the pandemic. Musk accused Twitter of breaking his course when, among other things, he cut hiring and fired two executives without telling him.
But Twitter maintains that Musk actually wanted layoffs at the company. On April 28, shortly after Musk signed a deal to buy Twitter, he texted Taylor to say his “biggest concern is headcount and expense growth,” according to the suit. Twitter says it informed Musk’s lawyers of his decision to fire the executives and that the lawyers “did not object.” (The lawsuit does not say when Musk’s lawyers were notified of those decisions.)
Musk reneged on the deal by failing to make “best reasonable efforts” to close the deal, and therefore has no right to terminate it.
Twitter said in its lawsuit that Musk appeared to have abandoned efforts to complete his debt financing. And it disappeared when Twitter executives, including Ned Segal, his chief financial officer, reached out to discuss the numbers on spam accounts that Musk had said concerned him.
Musk also appeared to ditch executives who were helping him close the deal, such as former Intel CEO Bob Swan, according to the lawsuit. On June 23, Musk said on Twitter that he had asked Swan to “leave settlement proceedings as we are not on the same wavelength.”
Now what? Musk can stick to his guns and count on unearthing something embarrassing about Twitter in discovery. You can also expect a judge to determine that forcing you to close the deal would be too complicated, given the size of the transaction. You could try to strike a new deal with Twitter at a reduced price, or walk away with damages (but at what price?). and it will definitely keep tweeting.
THIS IS WHAT IS HAPPENING
Oil prices fall below $100 as signs of a global economic slowdown mount. US benchmark prices were higher today, after falling around 8 percent yesterday on concerns about the economic outlook for China, the world’s top oil importer. Meanwhile, the euro rose slightly against the US dollar today after falling to near parity yesterday for the first time in almost 20 years.
A poll shows a tight race for control of Congress ahead of the midterm elections. For the first time in a national Times/Siena College poll, Democrats garnered a higher share of support among white college graduates than among nonwhite voters, an indication of the shifting balance of political energy in the Democratic coalition. Recently, in the 2016 congressional elections, Democrats won more than 70 percent of nonwhite voters and lost among white college graduates.
Shoppers are still willing to pay more for drinks and snacks, says PepsiCo. The company’s second-quarter revenue and profit, which beat analysts’ expectations, grew faster than sales volumes, meaning the company was able to charge more for its products. But it left its earnings forecast unchanged due to uncertainties about whether that could continue.
Apple ends its consulting agreement with designer Jony Ive. Ive and Apple have agreed to stop working together, ending a three-decade career during which the designer helped define every rounded corner of an iPhone and guided the development of the Apple Watch.
All eyes on the inflation report
This morning, the government will report what has become the most watched and worried economic data point of 2022: the monthly update of consumer prices. This is what you can expect:
A new high. Economists estimate that the consumer price index, a closely watched measure of inflation, rose 8.8 percent in June compared to a year earlier, reports Jeanna Smialek of The Times. That would be the fastest 12-month pace since 1981. The increase was fueled by higher gas prices, rising rents and rising grocery bills.
Some hopeful signs of relief. Gas prices have been falling recently. The drop is too recent to be reflected in the June data, but if it continues it could help reduce inflation. And economists are finding that, aside from food and fuel prices, inflation trends for everything else are beginning to moderate. Target, like other retailers, recently reported that it was having trouble selling its inventory. “There is going to be a silver lining to the inflation report,” Vincent Deluard, a strategist at institutional brokerage firm StoneX Group, told DealBook. “If you dig into the report, you’ll see gasoline, summer travel, and some of these things will ease, but they will ease very slowly.”
A possible “leaner effect”, but probably not until 2023. When the stock market is strong, there’s a lot of talk about the wealth effect, the idea that a rising stock market can make people feel richer and spend more. With the stock market crashing, is it possible we could see the opposite, a “leaner effect,” where people spend less, causing inflation to fall?
Deluard said don’t count on that, at least not until next year. Because of the concentration of wealth in the United States, he said, those who see their net worth fall the most in bear markets are those with the least propensity to consume more or less depending on the economy.
For full coverage of today’s inflation report, see Times special reportwhich will be updated throughout the day.
“Students who already have an advantage don’t need another advantage.”
— Logan Roberts, a Yale student who opposes admissions preferences for the children of former students. If the Supreme Court rules against affirmative action this fall, inherited preferences could get harder to defend.
The missing crypto founders
Where are Su Zhu and Kyle Davies, the founders of failed cryptocurrency hedge fund Three Arrows Capital? Until recently, they were known as reliable veterans on the blockchain scene. But they appear to have been “ghosted,” compounding fears that the collapse of the once-sounding company last month, which bankrupted broker Voyager Digital and had a ripple effect on other companies, could leave deep scars. in the crypto industry.
Zhu and Davies are ordered to report. Yesterday, a federal bankruptcy judge in New York granted the liquidators’ requests to subpoena them. The liquidators’ attorney argued that the founders had not been meaningfully cooperative or provided the required information, and that attempts to find them in an office had failed; it was closed and empty. “To put the world on notice” that the liquidators control the assets of Three Arrows, the lawyer also requested an order to suspend collections from US creditors. was granted
Three Arrows denied that he was uncooperative. Zhu, who had been a prolific podcaster, reappeared on Twitter yesterday after an unusual silence of a week. He said that Three Arrows was making a good faith effort to work with the liquidators, and attached a letter of his lawyer to the complainants, denying their statements and pointing out that “our clients and their families have received threats of physical violence.” In another accompanying letter, the lawyer said that as investors and shareholders, and in Zhu’s case, as a creditor of the firm, his clients were concerned that the liquidators had also caused substantial losses by not exercising a cryptocurrency call option. , possibly violating your rights. legal duties.
But neither Zhu nor his lawyer said where the founders were, or whether they would show up if subpoenaed. What is clear is that several cryptocurrency companies are already caught up in the company’s problems, and it is possible that more will join them. The judge also granted the request of the liquidators to summon the companies linked to the fallen company.
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Correction: Yesterday’s bulletin incorrectly attributed a citation. It was a spokeswoman for Sen. Patrick Toomey who provided a statement to DealBook via email, not the lawmaker himself.
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