Twitter’s Legal Battle Against Elon Musk Heats Up     – CNET

Twitter’s Legal Battle Against Elon Musk Heats Up – CNET

twitter elon musk 2022 02

What’s happening

New documents shed light on the arguments billionaire Elon Musk and Twitter are trying to make in a legal battle over a $44 billion deal to buy the social media company. Musk is trying to walk away from the agreement.

Why it matters

The legal battle has raised questions about Twitter’s future.

What’s next

Twitter’s shareholders are scheduled to vote on the deal in September, and a five-day trial is scheduled in October.

Twitter is pushing back against billionaire Elon Musk’s allegations that the company “hoodwinked” him into signing a $44 billion deal to purchase the social media platform.

Musk, who’s trying to back out of the deal, filed a countersuit against Twitter last week in Delaware’s Court of Chancery. In July, Twitter sued Musk to enforce the merger agreement and alleged that the billionaire is trying to get out of acquiring the company because his personal wealth has fallen and the purchase has thus become more expensive. 

Musk denied Twitter’s claims and alleges that Twitter failed to provide him information to verify that fewer than 5% of Twitter’s more than 220 million daily users were spam-focused or fake, an important metric for understanding Twitter’s ads business. The billionaire claims Twitter misrepresented or omitted information that would shed light on the company’s value. 

In a 127-page legal filing in response to Musk’s allegations, Twitter called Musk’s claims “implausible and contrary to fact as it sounds.” Twitter shared the document publicly in a tweet on Thursday, escalating its legal feud with the billionaire.

“When Twitter sued to enforce its rights and exposed the weakness of those reasons, Musk spent weeks coming up with more supposed reasons — the Counterclaims — which offer up an entirely new set of excuses for his breach. The Counterclaims are a made-for-litigation tale that is contradicted by the evidence and common sense,” the legal filing says.

Musk’s countersuit accuses the company of providing misleading information, prompting the billionaire to strike a deal to buy the company at “an inflated price.” Musk has said he thinks Twitter should move away from relying heavily on ads for its revenue and instead make money through subscriptions, payments and creator tools. The countersuit said that if Twitter’s estimates of daily users are lower than the company says, that would harm “the viability of Musk’s proposed subscription model.”

While Twitter has accused Musk of requesting data designed to “tank” the deal, the billionaire alleges in the countersuit that the company is trying to hide something.

“As a long bull market was coming to a close, and the tide was going out, Twitter knew that providing the Musk Parties the information they were requesting would reveal that Twitter had been swimming naked,” the countersuit said.

Twitter said it never misled Musk because the company had already disclosed there were limitations to its estimates of spam or fake accounts and that the number could be higher. Musk claims that the number of spam or fake accounts is at least 10%, but Twitter said “Musk is not measuring the same thing as Twitter or even using the same data as Twitter.”

The countersuit alleges that Twitter’s daily user numbers aren’t themselves a useful metric for forecasting revenue growth and calls the company’s reliance on the measure “a sham.” Musk alleges Twitter’s internal data showed that more than 65 million of its 229 million monetizable daily active users in the first quarter don’t appear to be seeing any ads. Twitter said in its response that Musk’s claims are an attempt to “distort” data provided by the company and that they reflect his “inappropriate effort” to use litigation to “undermine Twitter’s business.”

Musk lawyer Mike Ringler didn’t immediately respond to a request for comment.

Twitter and Musk are expected to head to trial on Oct. 17 if they don’t reach a settlement. Twitter’s shareholders are scheduled to vote on the deal in a special meeting on Sept. 13.

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Queenie Wong

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