Elon Musk’s latest promise to buy Twitter can’t be trusted, the company told a Delaware Court of Chancery judge yesterday.
“Now, on the eve of trial, Defendants declare they intend to close after all. ‘Trust us,’ they say, ‘we mean it this time,’ and so they ask to be relieved from a reckoning on the merits,” Twitter wrote in a filing that opposed Musk’s motion to stay the trial. “To justify that relief, they propose an order that allows them an indefinite time to close on the basis of a conditional withdrawal of their unlawful notices of termination coupled with an explicit reservation of all ‘claims and defenses in the event a closing does not occur.’ Defendants’ proposal is an invitation to further mischief and delay.”
While Musk told the court that debt financing needed to complete the purchase is on track, Twitter’s filing said there is a problem:
Just this morning, a corporate representative for one of the lending banks testified that Mr. Musk has yet to send them a borrowing notice and has not otherwise communicated to them that he intends to close the transaction, let alone on any particular timeline. The bank further testified that the main task necessary to close the deal—memorializing the debt financing—could have happened in July but didn’t because Mr. Musk purported to terminate the deal.
Judge Kathaleen McCormick granted Musk’s motion for a stay yesterday, preventing the trial from beginning on October 17 as scheduled. But she seems to have taken Twitter’s concerns into account because McCormick’s grant of the stay does not give Musk “an indefinite time to close.” If Musk doesn’t complete the purchase of Twitter by October 28, a new trial would be scheduled for November.
“This action is stayed until 5 p.m. on October 28, 2022, to permit the parties to close on the transaction. If the transaction does not close by 5 p.m. on October 28, 2022, the parties are instructed to contact me by email that evening to obtain November 2022 trial dates,” McCormick wrote.
Musk is the obstacle, Twitter says
Musk’s motion for a stay blasted Twitter for wanting to continue litigation, claiming that “Twitter will not take yes for an answer” and is “recklessly putting the deal at risk and gambling with their stockholders’ interests.”
Twitter’s response said Musk should have completed the merger long ago:
The obstacle to terminating this litigation is not, as Defendants say, that Twitter is unwilling to take yes for an answer. The obstacle is that Defendants still refuse to accept their contractual obligations. For months, Defendants have pursued increasingly implausible claims and over and over sought to delay trial on the merits to enforce the Merger Agreement. Discovery has shown each and every one of those claims to be utterly without merit. It has also shown that Defendants have repeatedly breached their obligation to exercise reasonable best efforts to move toward closing. The merger should have closed long ago, as Defendants’ recent concessions confirm.
Musk’s motion said that “Debt Financing parties are working cooperatively to fund the close, and closing is expected on or around October 28.” But Twitter’s reply said the defendants “refuse to commit to any closing date. They ask for an open-ended out, at the expense of Twitter’s stockholders (who are owed $44 billion plus interest), all the while remaining free to change their minds again.”
“Twitter is entitled to its day in court”
Twitter wrote that Musk’s proposed order sought a stay “[w]ithout any admission of liability and without waiver of or prejudice to [their] claims and defenses.” Twitter said this provision would let Musk “invent new grounds” to avoid completing the merger.
Twitter also said Musk “provided no justification” for failing to complete the merger already and breached the obligation to use “‘reasonable best efforts’ to close the merger and to ‘do… all things necessary, proper or advisable’ to close the financing at or before closing.” The merger agreement requires Musk to close the deal within two business days of all conditions being met, a date that “came and went on September 15,” Twitter said. (Twitter shareholders approved the merger on September 13.)
Twitter’s filing ended with a plea to maintain the October 17 trial date—but also said the merger could be finished next week. “Until Defendants commit to close as required, Twitter is entitled to its day in Court, to demonstrate its entitlement to specific performance and prove Defendants’ breaches so as to ensure complete relief in the event the closing should for any reason not occur,” the filing said. “Defendants can and should close next week. Until they do, this action is not moot and should be brought to trial.”