Twitter, Elon Musk Trial Postponed as Deal Talks Stall
Delaware Chancery Judge says parties have until Oct. 28 to close the deal, otherwise trial will resume in November
The surprise ruling, granting a request by Mr. Musk, effectively ends negotiations for a settlement that would allow the parties to quickly close the deal. Mr. Musk now has until Oct. 28 to do so.
Chancellor Kathaleen McCormick said if the deal doesn’t close by that date, the parties should contact her to schedule a November trial. She had previously denied attempts by Mr. Musk to delay the trial and had fast-tracked it at Twitter’s request.
As the Oct. 17 trial date neared, Mr. Musk kicked off the negotiations earlier this week with his surprise proposal to close the deal at its original price after seeking for months to get out of it.
But by Thursday, the two sides had run into a new set of obstacles.
The negotiations, which followed an earlier effort by Mr. Musk to negotiate a lower price, were focused on conditions to stay litigation over the deal until it can close and on ensuring Mr. Musk’s debt financing remains in place, as The Wall Street Journal reported Wednesday. Mr. Musk had added the request that the deal be contingent on his receipt of the $13 billion of debt financing he lined up to help fund it.
Late Thursday, the dispute spilled into public view with Mr. Musk’s filing, which said he expected to have the financing in place to close the deal around Oct. 28. Twitter responded by calling his request an “invitation to further mischief and delay.”
Mr. Musk in his filing said the financing banks are working to fund the deal so it can close. He argued that proceeding with the litigation for now, as Twitter prefers, could keep the deal in limbo longer.
“Twitter will not take yes for an answer,” the filing read. “Astonishingly, they have insisted on proceeding with this litigation, recklessly putting the deal at risk and gambling with their stockholders’ interests.”
Twitter promptly responded in its own filing, arguing that Mr. Musk’s side is refusing to accept its contractual obligations.
The company said Mr. Musk should be arranging to close the transaction no later than Oct. 10. The merger agreement stipulates that the deal should close no later than the second business day after the conditions to close are met, which had happened in September, it said. The company noted that it was told by one of the lending banks that Mr. Musk hasn’t yet communicated that he intends to close the transaction.
“Defendants can and should close next week,” Twitter said. “Until they do, this action is not moot and should be brought to trial.”
Lawyers for both sides had been trying to reach an agreement in the next few days that would pause the trial and avert a deposition from Mr. Musk, which after being postponed was scheduled for Monday.
The idea was to put the litigation on hold until the deal closes, at which point it would be dropped. The judge’s ruling Thursday negates the need for such an agreement.
Twitter said in response to the ruling that it looks forward to closing the transaction at the originally agreed upon $54.20 a share by Oct. 28.
Mr. Musk agreed to buy Twitter in April. He later moved to get out of the deal, claiming among other things that Twitter had misrepresented the number of bots on its platform. Twitter sued him over the summer and he countersued.
Renewed uncertainty about the deal has weighed on Twitter shares, which closed down 3.7% at $49.39 Thursday. They had shot up above $52 earlier in the week after Mr. Musk signaled a willingness to close the deal after all.