Attorneys for Elon Musk allege in a recent filing that Twitter has misrepresented information about the company and its “key statistics” and distorted its value in an attempt to get the billionaire to buy the social media platform at too high a price.
The allegations were detailed in a counter-charge made public Thursday in a Delaware Chancery Court. The counter-charge alleges fraud and alleges that Twitter made statements in the Securities and Exchange Commission disclosures that were “far from true” and contained “a host of material misrepresentations or omissions that distort Twitter’s value.”
In its response, Twitter said the SEC disclosures are accurate and that the company “hasn’t misrepresented anything”.
The claim that Musk was “cheated” into signing the merger is “as unlikely and factual as it sounds,” Twitter said, claiming Musk is making excuses to escape the deal.
Twitter sued Musk last month after Musk wanted to pull out of a deal to buy the company for $54.20 a share, or $44 billion, and take it private. Since Musk first made his bid on Twitter in April, the social media platform’s stock price has fallen to $41, leading some, including Twitter itself, to speculate that Musk is simply seeking a lower price for the company.
Musk, in turn, has accused Twitter of withholding data on the number of fake and spam accounts on its site, arguing that the company has misled investors about how many active users it really has. Much of the counterparty focuses on those accounts and active user numbers.
Twitter has responded to those claims in the past by saying it has given Musk all the information he asked for.
Now Twitter is going to court to force Musk to go through with the sale.
That’s one of several twists and turns Musk’s bid for the company has taken over the past four months.
It all started when Musk became Twitter’s largest public shareholder in April, declaring to own more than 9% of the company’s shares.
Musk was originally going to serve on Twitter’s board of directors in connection with his commitment. At some point, that changed and he made an offer to buy Twitter entirely.
“I invested in Twitter because I believe in its potential to be the platform for free speech around the world,” Musk said in an April 14 letter to Bret Taylor, the chairman of Twitter’s board of directors. “I believe that freedom of expression is a social necessity for a functioning democracy.”
Twitter’s initial response to the offer was to pass a so-called “poison pill provision,” which would have created more company stock to dilute the value of Musk’s assets.
But by the end of that month, Musk had made his 11-figure offer to buy Twitter, and the social media company reversed course and decided Musk’s $44 billion valuation of the company was the best price its shareholders could get. On April 25, it accepted Musk’s offer.
In May, Musk said he was putting the deal on hold in response to what he said were issues with the number of fake and spam accounts on the site. Twitter had long stated in official documents that it believed no more than 5% of accounts on its site fell into that category — raising questions about Musk’s true motivations behind his apparent kickback.
Between the time Musk made his offer for $54.20 a share and his claim that he was pausing the deal, Twitter’s share price had fallen to just $45.
Be that as it may, Musk and Twitter were unable to agree to settle the dispute, leading to the current standoff. Now, lawyers for Twitter and Musk have set an October trial date to argue the dispute in Delaware Chancery Court, the primary US jurisdiction for settling business matters.
Claire Cardona contributed.