We knew neither Twitter nor Elon Musk would go quietly. Twitter’s legal team is working overtime to gather information to make their case against Elon Musk, who is trying to back out of his deal to buy Twitter for $44 billion. Last Monday, Twitter issued a subpoena seeking information about potential investors including Chamath Palihapitiya, David Sacks, Steve Jurvetson, Marc Andreessen, Jason Calacanis and Keith Rabois, and their communications with Musk, reports The Washington Post.
The subpoena requests information about “checklists, timelines, presentations, decks, organizational calls, meetings, notes, recordings” regarding the financing of the deal, said The Post, who obtained a copy of the subpoena. The subpoena also requested information about fake accounts and bots, which is one of Musk’s main concerns. From the early days of the deal, Musk asked for confirmation and documentation about how many fake accounts and bots Twitter has and the ratio of fake accounts to real ones. Musk contends the lack of information and transparency is a material breach of the original deal and why he wants out.
In addition, the subpoena requested information about All-In Summit 2022 where Musk spoke via videoconference, commenting on the deal. The May event was hosted by Palihapitiya, Calacanis, Sacks and David Friedberg. According to The Post, at the event, Musk said he had concerns about the deal, would try to lower the price for the acquisition, and that Twitter was possibly misleading him. Twitter seems to feel that these were early indications that Musk would not honor his end of the agreement.
Other subpoenas were issued to investment banks involved in financing the deal, including Morgan Stanley, Barclays and Bank of America, to Tesla and SpaceX, and to entrepreneur and investor Joe Lonsdale, who also spoke at the All-In event. Lonsdale commented on the subpoena on Twitter.
Elon Musk has been quiet on the issue, at least on Twitter. His only recent comments involving Twitter were vague.
One purpose of the subpoenas is to determine if Musk had been trying to ditch the deal before he told Twitter he was backing out, says The New York Times. Twitter’s lawsuit alleges that Musk violated their agreement by failing to secure financing, which might indicate his intention to abandon the deal. Some analysts allege that Musk is actually trying to back out of the deal because Twitter’s value has decreased since he made his offer at $54.20 a share, but he is using the lack of information and transparency claim as his legal argument. As of 8:35 a.m. Friday, Twitter stock was valued at $41.06 per share.
According to The New York Times, Musk filed his legal response to Twitter’s lawsuit but it is not yet publicly available.
The Delaware judge presiding over the Twitter vs. Elon Musk lawsuit, Chancellor Kathaleen St. J. McCormick set a deadline of August 1 for sending out initial discovery requests. Depositions must be complete by September 9, says CNBC. The trial is set for October 17. Twitter has a shareholder meeting scheduled for September 13.
In the midst of the legal battle, Twitter reported its second quarter financials for 2021 in which the social media platform reported total revenue of $1.18 billion, a 1% decrease year-over-year, and an operating loss of $344 million, making this deal more important than ever.
The battle between Twitter and Elon Musk wages on and will continue to do so for the next three and a half months as each side tries to shore up their case. No one knows what will ultimately happen, but it seems Twitter will stop at nothing to force this deal to go through. Meanwhile, despite the subpoenas which could compel Musk’s associates to testify in court, Musk is holding firm to his claim that Twitter breached their agreement.