Attorneys for Elon Musk are claiming in a recent filing that Twitter misrepresented information about the company and its “key metrics,” and distorted its value in an attempt to cause the billionaire to agree to buy the social media platform at an inflated price.
The allegations were detailed in a countersuit made public Thursday in a Delaware Chancery Court. The countersuit alleges fraud and claims Twitter made statements in its Securities and Exchange Commission disclosures that were “far from true” and “contain numerous, material misrepresentations or omissions that distort Twitter’s value.”
Twitter in its response said its SEC disclosures are accurate and that the company “misrepresented nothing.”
The claim that Musk was “hoodwinked” into signing the merger is “as implausible and contrary to fact as it sounds,” Twitter said, and alleged that Musk is making excuses to escape the agreement.
Twitter sued Musk last month after Musk sought to back out of a deal to purchase the company for $54.20 per share, or $44 billion, and take it private. Since Musk first made his bid for Twitter in April, the social media platform’s share 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 about the volume of fake and spam accounts on its site, arguing the company has been misleading investors about how many active users it truly has. Much of the countersuit focuses on those accounts and active user numbers.
Twitter has responded in the past to those claims by saying it has given Musk all the information he’s asked for.
Now, Twitter is going to court to force Musk to follow through on the sale.
That’s among the several twists and turns that Musk’s bid for the company has taken in the last four months.
It all started when Musk became Twitter’s largest public shareholder in April, declaring holdings of more than 9% of the company’s stock.
Originally, Musk was going to take a seat on Twitter’s board of directors in connection with his stake. At some point, that changed, and he put together a bid to buy Twitter outright.
“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe,” Musk said in an April 14 letter sent to Bret Taylor, the chair of Twitter’s board. “I believe free speech is a societal imperative for a functioning democracy.”
Twitter’s initial response to the bid was to adopt a so-called poison pill provision, which would have created more shares of the company in order to dilute the value of Musk’s holdings.
But by the end of that month, Musk had made his 11-figure offer to buy Twitter, and the social media company reversed course, deciding Musk’s $44 billion valuation of the company was the best price its shareholders would get. On April 25, it accepted Musk’s bid.
By May, Musk said he was putting the deal on hold in response to what he said were issues with how many fake and spam accounts were on the site. Twitter had long stated in official filings that it believed no more than 5% of the accounts on its site fell into that category — raising questions about Musk’s true motivations behind his apparent backpedaling.
Between the time Musk made his offer for $54.20 per share and his assertion that he was pausing the deal, Twitter’s share price had fallen to as low as $45.
Whatever the case, Musk and Twitter could not come to an agreement to settle the dispute, leading to the current impasse. Now attorneys for Twitter and for Musk have an October trial date set to argue the dispute in Delaware Chancery Court, the main jurisdiction in the US for settling business matters.
Claire Cardona contributed.