What’s happening
A Delaware Chancery Court judge ruled that a trial over billionaire Elon Musk’s attempt to back out of a $44 billion deal to buy Twitter will begin on Oct. 17.
Why it matters
Getting to trial sooner could reduce the harm that Twitter and shareholders might face as uncertainty about the deal drags on.
Twitter and billionaire Elon Musk will go to trial from Oct. 17 to 21, a Delaware Chancery Court schedule confirmed Friday, over the Tesla CEO’s attempt to back out of a $44 billion deal to buy the company.
The official schedule comes a week after Twitter partially blamed a revenue shortfall on “uncertainty” linked to Musk’s rocky takeover bid and 10 days after a July 19 court hearing on the matter.
At the July 19 hearing, Twitter’s lawyers asked for trial in September while Musk’s lawyers pushed for the trial to start in late February. At the hearing, Chancellor Kathaleen St. Jude McCormick, the court’s chief judge, set the trial for October but didn’t specify an exact date.
Though neither Twitter nor Musk got exactly what they wanted, the shorter timeline that the judge suggested is still a win for the social media company, after its lawyers raised concerns about the potential harm that comes from Musk’s efforts to “bully his way” out of the deal.
In her remarks, McCormick said that the longer a merger transaction remains in limbo, the greater the risk of irreparable harm. She also noted that Musk’s lawyers seem to underestimate the ability of the court to quickly process complex litigation.
The July 19 hearing marked the first time that Musk’s and Twitter’s legal teams faced off in court.
Musk lawyer Andrew Rossman said at the hearing that the billionaire needed more time to verify that fewer than 5% of Twitter’s 229 million daily users are fake or spam accounts. Musk’s legal team has argued that the data is important to understand Twitter’s ads business. Rossman said Musk “has arguably more risk at stake than Twitter does if he ends up being forced to buy this company” and “doesn’t have an incentive to keep this hanging for a long time.”
Twitter lawyer Bill Savitt pushed back against the argument and said the company has pointed out that there are caveats to the data that note the number of spam accounts could be higher.
On July 8, Musk announced that he was terminating the merger agreement reached in April. On July 12, Twitter sued Musk to force him to complete the purchase and accused the billionaire of making information requests that were “designed to try to tank the deal.” The company alleges in the lawsuit that the reason the billionaire wants to back out of deal is because his personal wealth has fallen, making it more expensive for him to acquire the company.
In a related development, Musk filed a countersuit on Friday. Details of Musk’s suit have been kept confidential but could be publicly available soon, according to The Wall Street Journal. The countersuit was expected.
Musk is also facing lawsuits from Twitter shareholders. A Twitter investor who holds 5,500 Twitter shares sued Musk on Friday, urging the Delaware Chancery Court to enforce the merger agreement, Bloomberg reported.
Meanwhile, hedge fund Greenlight Capital took a new stake in Twitter in July. Multiple news outlets, citing a letter sent to investors on Monday, reported the hedge fund paid an average $37.24 per share. CNET has also seen the letter.
“At this price there is a $17 per share of upside if TWTR prevails in court and we believe about $17 per share of downside, if the deal breaks. So we are getting 50-50 odds on something that should happen 95%+ of the time,” the letter said.
Greenlight Capital added it thinks the Delaware Chancery Court has an incentive to enforce the deal.
“If it lets Musk off the hook, it will invite many future buyer’s remorse suits,” the letter said.
CNET’s Sean Keane and David Lumb contributed to this report.
