Business

Twitter court case versus Elon Musk will go ahead by October, judge rules

A Delaware court has granted a partial win to Twitter in its legal battle with Elon Musk over a failed merger by ordering that the trial to settle their acrimonious divorce will happen by October.

Twitter had sought short, fast trial, while Musk wanted February court date in lawsuit over failed merger

SpaceX and Tesla founder Elon Musk was asking for a trial in his case against Twitter to start next year, but the judge presiding over the case has moved up that timeline at the company's request. (Joe Skipper/Reuters)

A Delaware court has granted a partial win to Twitter in its legal battle with Elon Musk by ordering that the trial to settle their acrimonious divorce will happen by October.

Kathaleen St. Jude McCormick, the presiding judge in Delaware's Court of Chancery, ruled that the court case between the two sides will proceed in October at the latest

Twitter has originally asked for a trial to start as soon as September and take no more than four days to argue, while Musk's lawyers were asking for a court date some time in February or later, and for the court to grant both sides weeks to present their cases. They argued that an expedited trial would prevent the truth about how big a problem bots are on Twitter from coming to light at a rushed trial.

The judge ruled that the case should only take about five days to hear, a timeframe that is much closer to what Twitter was asking for.

"This is a major victory for Twitter and a major defeat for Elon Musk," lawyer Mitchell Epner with the firm Rottenberg Lipman Rich said.

Failed merger

The two sides are facing off in court over their high profile but ultimately unsuccessful takeover. In April, Musk proposed to buy the social media company for more than $44 billion, due to concerns that the company wasn't valuing free speech the way he'd like them to.

Over the weeks that followed, however, Musk started to have second thoughts.

He says he walked away from the deal because Twitter has failed to provide adequate information about the number of fake, or "spam bot," Twitter accounts, and that it has breached its obligations under the deal by firing top managers and laying off a significant number of employees.

WATCH | Elon Musk walks away from Twitter deal:

Elon Musk says $44B Twitter deal 'temporarily on hold'

7 months ago
Duration 4:09
Elon Musk says his planned $44 billion US purchase of Twitter is 'temporarily on hold' pending details on spam and fake accounts on the social media platform, but he is 'still committed to acquisition.'

Twitter in turn accuses Musk of being insincere from the start and merely showing interest in buying the company as a publicity stunt.

"It's attempted sabotage. He's doing his best to run Twitter down," Twitter's lawyer William Savitt told the judge.

He said Musk is trying to misdirect people by talking about bots on Twitter, even though that issue has no bearing on the deal he signed and is simply him trying to "conjure an exit ramp for a deal that doesn't have one."

Musk counters that the question of bots and his allegations that the company has not been upfront about them is the central reason why he should be allowed to back out of the deal.

"He wanted it to take a lot of testimony and review a lot of evidence about the number of robot or bot accounts on Twitter, claiming that those facts would be essential to determining whether or not he was required to go through with the purchase," Epner said.

Musk's lawyer Andrew Rossman says the idea that Musk wants to sabotage the company is "preposterous" because he is the second-largest shareholder, owning more than the company's board itself does.

"He has no interest in damaging the company," Rossman said. 

Twitter shares down

As part of the original merger deal, both sides agreed to pay a $1 billion break fee to the other should either side pull out, but the two sides are now suing each other for far more than that.

Twitter specifically asked the court to rule on the issue quickly, since the uncertainty and messiness is overhanging the company's stock price.

Twitter shares are currently worth less than $40 each — well below Musk's offer price of more than $54 per share.

"The reality is delay threatens irreparable harm to the sellers," the judge said, referring to Twitter.

In a statement, the social media company said it was "pleased that the court agreed to expedite this trial."

Epner says it seems like the case is going Twitter's way so far, and he would not be surprised if the final outcome is that Musk is forced to buy Twitter for the inflated sum of $44 billion, or pay some other amount to the company in order to not buy it.

"It is possible that Elon Musk will trade a controlling share of Tesla for full ownership of Twitter, an enterprise that he has said is fated never to make money," he said.

With files from The Associated Press and Reuters

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