In a special shareholder meeting held Tuesday, Twitter shareholders approved the proposed acquisition by Elon Musk at $54.20 per share, or $44 billion, as proposed by Musk in April. In a news release, Twitter said approximately 98.6% of the votes cast at the special meeting were in favor of adopting the merger agreement. According to Bloomberg, the shareholder meeting was seven minutes long, including three minutes for voting. In addition, shareholders were allowed to submit their votes in advance of the meeting.
“The shareholder approval satisfies the final condition precedent to the closing of the merger under the merger agreement (other than those conditions that by their nature are to be satisfied at closing). Twitter stands ready and willing to complete the merger with affiliates of Mr. Musk immediately, and in any event, no later than on September 15, 2022, the second business day following the satisfaction of all conditions precedent, which is the timeline required by the merger agreement,” said Twitter in a September 13, 2022 news release.
Twitter also acknowledged that Musk has attempted to terminate the merger agreement, and they believe that Musk’s termination of the agreement is “invalid and without merit.” Twitter believes Musk should be bound by the merger agreement and the agreed-upon terms and conditions. To enforce the completion of the agreement, Twitter has sued Musk in the Delaware Court of Chancery. A five-day trial is scheduled to begin on October 17.
Musk’s counsel sends third termination letter
The special shareholder meeting had already been scheduled when Musk send a third letter to Twitter last Friday, trying to get out of the deal. In the letter, Musk’s attorney Mike Ringler of Skadden, Arps, Slate, Meagher & Flom LLP said they were sending a third letter because “additional facts have come to light” that show Twitter breached the merger agreement. The third letter is intended to protect Musk’s interests in case the August 29 termination notice is determined to be invalid.
Ringler stated that on June 28 Twitter entered into a separation agreement with Peiter Zatko in which they made severance payments to Zatko and his attorney totaling $7.75 million. Twitter did not disclose this payment to Musk, and he learned about it when Twitter filed the separation agreement with the court on September 3. Musk’s counsel alleges this payment violated the agreement.
Zatko is Twitter’s former head of security who submitted a whistleblower disclosure to Congress, the Securities and Exchange Commission, the Federal Trade Commission, Department of Justice and other federal agencies alleging the social media platform has major cybersecurity vulnerabilities. Zatko said these vulnerabilities are “extreme, egregious deficiencies” that have the potential to put user data, company shareholders, national security and democracy at risk, according to CNN.
Zatko, who reported to Twitter’s CEO, also said the company misled both the board and government regulators about potential dangers and deficiencies and that leadership tried to cover up the vulnerabilities. Zatko was fired for poor performance in January. Twitter denies the allegations.
“Mr. Zatko was fired from his senior executive role at Twitter in January 2022 for ineffective leadership and poor performance,” a Twitter spokesperson told CNN. “What we’ve seen so far is a false narrative about Twitter and our privacy and data security practices that is riddled with inconsistencies and inaccuracies and lacks important context.”
“Mr. Zatko’s allegations and opportunistic timing appear designed to capture attention and inflict harm on Twitter, its customers and its shareholders. Security and privacy have long been company-wide priorities at Twitter and will continue to be,” the spokesperson said.
Musk’s request for a continuance denied
Musk requested a continuance to move the trial to mid-November, but his motion was denied last week. Chancellor Kathaleen McCormick’s ruling was partially favorable to Musk’s side, however. She ruled that Musk could add claims stemming from the whistleblower disclosure in his countersuit.
“I previously rejected Defendants’ arguments in response to Twitter’s motion to expedite, making clear that the longer the delay until trial, the greater the risk of irreparable harm to Twitter,” McCormick wrote. “I am convinced that even four weeks’ delay would risk further harm to Twitter too great to justify.”
Meanwhile, stockholders seem unphased as the company’s stock price has remained relatively steady over the last month. If the merger does, indeed, go through, shareholders will receive a premium on the stock’s current value. Unless Twitter’s value skyrockets prior to the trial, Musk will still be paying well above market value.
The shareholder vote and third termination letter add more drama to an already contentious situation. We expect to see more finger-pointing and posturing over the next month as the parties prepare for trial. Twitter feels that they have fulfilled all their obligations under the merger agreement, and Musk will try any possible avenue to get out of this $44 billion deal. Will he succeed?