Twitter is suing Musk banks fighting for takeover

Twitter has sent dozens of quotes in recent days to banks and investors who supported Elon Musk in his bid to acquire the company, while also looking for more information on well-known tech industry personalities who are considered close to Mr. Musk.

The citations are part of efforts to help determine whether Mr. Musk had quietly abandoned his deal to acquire Twitter even before communicating his plans to do so, which would violate his contract with the company, two people said. familiar with Twitter’s thinking, which asked for anonymity because the discussions were private.

Under the terms of the deal, Mr. Musk must use “best reasonable efforts” to close the sale, including securing debt financing for the $ 44 billion purchase. But Twitter claims in a lawsuit against Mr. Musk in Delaware Chancery Court that he appeared to have abandoned efforts to complete his funding, contrary to the deal.

Mr. Musk, who is one of the richest men in the world, has signed letters of commitment with a number of Wall Street banks, led by Morgan Stanley, for a total of $ 13 billion in debt financing. He later brought investors to Silicon Valley, including venture capital firm Andreessen Horowitz, to provide about $ 7 billion in funding.

In quotes sent to investment banks working for Mr. Musk, including Morgan Stanley, Barclays, and Bank of America, Twitter asked for information regarding his efforts to consume the financing of his debt, including the expected timeline for doing so. Twitter is also inquiring about Mr. Musk’s decision to revoke his loan to his Tesla stock to help fund the deal.

Mr. Musk had originally planned to take out a loan of approximately $ 12 billion against his Tesla stock. But the electric vehicle maker’s shares plummeted in the weeks following the signing of the deal, making such a loan considerably riskier.

Twitter also asked for more information on any analysis the banks made on Mr. Musk’s instruction on the number of fake users on its platform. He cited his concerns about him about fake Twitter accounts as why he wants to withdraw his offer from him.

What Mr. Musk’s bankers were asking for – and why – could be crucial to the deal. Twitter’s ability to sue Mr. Musk to force him to close the deal, under its “specific performance clause,” is canceled if his debt financing falls apart. But that escape only works if the banks, which signed letters of commitment, leave independently, not if Mr. Musk pushes them.

“The Delaware courts themselves are very wary of people who basically have their fingerprints all over self-sabotage,” said Eric Talley, professor of corporate law at Columbia Business School.

Representatives from Morgan Stanley and Barclays declined to comment. A Bank of America spokesperson did not respond to a request for comment.

Mr. Musk filed a response to Twitter’s lawsuit on Friday, though it’s temporarily sealed from the public as he and Twitter negotiate which parties to black out. His arguments justifying his decision to abandon the Twitter deal so far have centered on the company’s public disclosures about fake bots and accounts.

His lawyers have implied that those revelations were materially misleading, which could provide Mr. Musk with reasons to withdraw from the deal. (Twitter’s attorneys asked what exactly was misleading.)

Twitter’s legal outreach last week also sought out more information about conversations with a number of Silicon Valley heavyweights that Musk is known to be close to. That information could shed further light on the evolution of his way of thinking about a deal once he started sending out tweets implying that he might want to retire or take another cut at a lower price.

In a subpoena issued to Valor Equity Partners, the investment firm founded by Antonio Gracias, a longtime friend of Musk, Twitter’s lawyers searched for more information on conversations with Chamath Palihapitiya, the chief executive of Social Capital, and David. Sacks, a general partner at the investment firm Craft Ventures, among others. Both Mr. Palihapitiya and Mr. Sacks were at a private conference where Mr. Musk expressed doubts about Twitter’s revelations regarding the number of fake accounts.

The Washington Post previously reported that Twitter was looking for more information on Mr. Musk’s acquaintances.

A spokesperson for Mr. Palihapitiya declined to comment. A spokesperson for Mr. Sacks did not respond to a request for comment.

Twitter also asked Valor for any information regarding Bob Swan, a former CEO of Intel who played a key role in putting the deal together. Twitter claimed that Mr. Musk fired Mr. Swan, saying the two men “weren’t on the same page” and later replaced him with Mr. Gracias. But according to Twitter’s lawsuit, Mr. Gracias “never showed up” to take on the funding effort that Mr. Swan “led”.

Mr. Gracias did not respond to a request for comment.

Kate Conger contributed to the report.

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