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In
a letter sent to Musk, dated Sunday and filed with regulators on
Monday, Twitter said it had not breached its obligations under
the merger agreement as indicated by Musk on Friday for looking
to end the deal. (https://bit.ly/3c2QVoP)
"Twitter demands that Mr. Musk and the other Musk Parties comply
with their obligations under the Agreement, including their
obligations to use their respective reasonable best efforts to
consummate and make effective the transactions contemplated by
the Agreement," the letter said.
The company has planned to sue Musk to force him to complete the
deal, a threat he laughed off on Monday, when he sent a series
of tweets joking about Twitter and its threat to enforce the
agreement in court. Twitter is planning to file a lawsuit early
this week in Delaware, people familiar with the matter told
Reuters.
Twitter said in the letter that the merger agreement remained in
place, adding it would take steps to close the deal.
Twitter's shares ended down 11.3% at $32.65, a 40% discount to
Musk's $54.20 bid and the biggest daily percentage drop in more
than 14 months. They rebounded less than 1% in extended trading.
Tesla's shares closed down almost 7%.
Traders short selling Twitter's tumbling stock made $148 million
in mark-to-market profits on Monday, while short bets against
Tesla resulted in $1.3 billion in mark-to-market profits,
according to S3 Partners.
"Twitter's board must contemplate the potential harm to its
employee and shareholder base of any additional internal data
exposed in litigation," Benchmark analyst Mark Zgutowicz said.
(Graphic: Twitter shares reaction to Musk's $44 billion bid:
https://graphics.reuters.com/TWITTER-SHARES/gkvlgygawpb/Pasted%20image%201657533508374.png)
Francis Pileggi, a corporate litigator with Lewis Brisbois in
Delaware, said Musk could put the social media giant's so-called
"bots" front and center in future litigation if he defends
against Twitter's lawsuit by claiming the company misrepresented
the number of fake accounts.
"I'd be surprised if he's prohibited from getting that
information," Pileggi said.
Pileggi said if the number of fake accounts is many times higher
than the 5% estimated by Twitter, it could lead to negotiations
for a reduced price for the social media platform.
Legal experts say the 16-year-old social media company has a
strong legal case against Musk, but could opt for a
renegotiation or settlement instead of a long court fight.
"We believe that Elon Musk's intentions to terminate the merger
are more based on the recent market sell-off than ... Twitter's
'failure' to comply with his requests," Jefferies analyst Brent
Thill wrote in a note.
"In the absence of a deal, we would not be surprised to see the
stock find a floor at $23.5."
(Reporting by Tom Hals in Wilmington, Delaware, Medha Singh,
Akash Sriram and Chavi Mehta in Bengaluru; Editing by Anil
D'Silva, Sriraj Kalluvila and Aurora Ellis)
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