The San Francisco-based company, which last week threatened to sue Musk over the deal, filed the lawsuit in the Delaware Chancery Court on July 12. The court specializes in corporate disputes.
“Rather than bear the cost of the market downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s stockholders,” Twitter’s lawyers write.
“Since signing the merger agreement,” the suit alleges, “Musk has repeatedly disparaged Twitter and the deal, creating business risk for Twitter and downward pressure on its share price.”
Musk hasn’t issued a public comment about the lawsuit. On the evening of July 12, his normally active Twitter account included no comments about the company.
“Musk apparently believes that he—unlike every other party subject to Delaware contract law—is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” the lawsuit states.
It adds that “Twitter also negotiated for itself a right to hire and fire employees at all levels, including executives, without having to seek Musk’s consent” while claiming the Tesla CEO “refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.”
Twitter also highlights some of Musk’s Twitter posts as alleged evidence that he was working to violate their contract.
“Musk’s Tweets on May 13 and 14 violated his obligations under the merger agreement, including the provisions prohibiting public comments not consented to by Twitter, disparagement, misuse of information provided under Section 6.4, requiring best efforts to consummate the merger,” the filing says.
In a bombshell filing with the Securities and Exchange Commission (SEC) on July 8, Musk said he wants out of the deal, citing claims that Twitter is awash in spam bots and automated accounts. For months, Musk asserted that he’s sought data about the bots, but Twitter has refused to comply.
At the same time, the world’s richest man has often criticized Twitter for explicitly using content moderation policies that favor left-wing users and for censoring conservative voices. After Twitter and Musk announced their deal in April, Musk suggested that he would curb Twitter’s controls and allow it to foster free speech.
But, Twitter alleges, Musk’s recent “repudiation follows a long list of material contractual breaches by [him] that have cast a pall over Twitter and its business.”
Twitter filed the lawsuit to “hold Elon Musk accountable to his contractual obligations,” Twitter board Chairman Bret Taylor wrote in a post on the website.
The company is now asking the Delaware court for an expedited trial in September. In prior filings with the SEC, the two parties had set a deadline for Musk to close the deal by Oct. 24.
The social media company’s shares plunged even farther to $34.06 on July 12. That’s down about 35 percent from the April 25 announcement, when Twitter’s shares were trading higher than $50.