Elon Musk Responds to Twitter’s Lawsuit Over $44 Billion Deal

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Elon Musk accused Twitter on Friday of deceiving him about its service, obfuscating facts and not notifying him of executive changes, in his first formal response to the company’s lawsuit aimed at forcing him to complete a $44 billion acquisition of the social media service.

Lawyers for Mr. Musk, who struck the blockbuster deal to buy Twitter in April but has since tried to terminate the purchase, made the arguments in a legal filing intended to oppose the company’s demand for a four-day trial in September in the case.

Twitter is rushing to court after “a two-month treasure hunt of delays, technical bottlenecks, evasive answers and, ultimately, refusals,” Mr. Musk’s lawyers said in the filing. They added that Twitter was trying to “shroud the truth” over fake accounts on the service, an issue that Mr. Musk has made central to his desire to pull out of the deal.

Twitter had requested a September trial because Mr. Musk was due to complete his deal to buy the company by Oct. 24. Mr. Musk’s lawyers proposed a February date for a trial instead, noting that the deal deadline automatically extends in the event of litigation. The banks that have committed to help fund the deal have promised that financing through April 25, 2023.

Mr. Musk’s legal filing was a forceful rebuke of Twitter’s accusations that he was trying to unjustly end the acquisition. In its lawsuit this week, Twitter said Mr. Musk had “knowingly, intentionally, willfully and materially breached” his agreement to buy the company by falsely claiming that he was not getting information about the prevalence of fake accounts on the service.

The ensuing legal battle promises to be ugly and prolonged. The back-and-forth between the two sides had already escalated for weeks before landing in court. Mr. Musk has made barbed comments about the company and frequently questioned the prevalence of fake accounts on the platform. Fake accounts are used to spread spam or manipulate Twitter’s service by falsely boosting trends, and are often automated rather than run by real people.

At one point, Mr. Musk tweeted that the deal with Twitter was on hold. His actions coincided with a slide in the value of tech shares, including those of Tesla, the electric carmaker that Mr. Musk leads and that is the main source of his wealth.

Twitter has maintained that it has worked with Mr. Musk to close the deal and is intent on seeing the sale through. In the deal agreement, Twitter and Mr. Musk have a so-called specific performance clause that allows the company to sue to force the deal through, as long as the debt that the billionaire has corralled for the acquisition is in place.

A Twitter spokesman declined to comment.

Ann Lipton, a professor of corporate governance at Tulane Law School, said it was clear why Twitter was moving with speed and Mr. Musk wasn’t.

“The Twitter board has every interest in getting this settled quickly, and he has every interest in delay — time is money,” she said. Of Mr. Musk, she added, “He’s going to want to get as much discovery as possible and take as much time up as possible, essentially hanging the threat of the litigation itself and, as time goes on, the uncertainty associated with it to force some sort of settlement or backing down.”

In the legal filing, Mr. Musk’s lawyers reiterated many of the arguments they had made this month when the billionaire said he intended to terminate the deal.

Twitter did not conduct a rigorous count of fake accounts and stymied Mr. Musk’s efforts to understand how spam was tallied, the filing said. “Musk was flabbergasted to learn just how meager Twitter’s process was,” the filing said, noting that the company used people to figure out the information rather than machine learning.

Mr. Musk tried getting more data from Twitter about fake accounts, the filing added, but the company “deliberately erected artificial roadblocks and frustrated defendants’ efforts.”

To determine how Twitter counts fake accounts, Mr. Musk needed months of discovery and dozens of depositions, his lawyers said. Mr. Musk has contended that Twitter’s public disclosures that fake accounts are around 5 percent of active users are misleading. Incorrect figures could be a “material adverse effect” under the deal’s terms and allow Mr. Musk to walk away, his lawyers said, arguing that the numbers bear “directly on Twitter’s prospective value to users and advertisers.”

Twitter has made mistakes with its user numbers before, Mr. Musk’s lawyers said. In April, the company said it had overcounted its active users from 2019 to 2021.

The company said in its suit that it had notified Mr. Musk’s lawyers about the two executives and that the lawyers had “raised no objection.”

Twitter and Mr. Musk are scheduled for a hearing on the case on Tuesday at Chancery Court in Delaware, where the company filed its lawsuit against the billionaire. The chancellor of the court, Kathaleen St. J. McCormick, has been assigned to oversee the case, and will decide whether to speed the case along, as Twitter has requested, or delay it for Mr. Musk.

If the suit moves to trial, Judge McCormick will determine whether Mr. Musk must close the deal. She could also let Mr. Musk walk away while forcing him to pay damages. By many readings of Twitter’s contract with Mr. Musk, damages would be capped at $1 billion. The two sides might also settle or renegotiate the deal.

Twitter has lost about a third of its value since Mr. Musk signed the deal to buy the company for $54.20 a share. The company is scheduled to report its quarterly earnings next Friday.



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