Twitter questions banks over Musk’s attempts to undermine a $44 billion deal

Elon Musk’s Twitter profile can be seen on a smartphone superimposed on printed Twitter logos in this image, taken April 28, 2022. REUTERS/Dado Ruvic/Illustration

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WILMINGTON, Del., Aug. 2 (Reuters) – Twitter Inc (TWTR.N) is seeking evidence that Elon Musk attempted to torpedo the financing of his $44 billion acquisition deal for the social media company, while also examining his motivation for support from the deal, legal experts said.

Twitter this week sent dozens of civil subpoenas to global banks such as units of Morgan Stanley (MS.N), co-investors in the deal, including a subsidiary of Brookfield Asset Management Inc (BAMa.TO), and Musk advisers, according to the filings for the past two days in the Delaware Court of Chancery.

Morgan Stanley declined to comment. Brookfield did not immediately respond to a request for comment. Representatives from Musk and Twitter could not be reached.

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The subpoenas seek documents and communications about the deal, the financing, any information about “bot” or fake Twitter accounts. They are also looking for information recipients may have about the potential impact on the deal of changes in the share price of electric car maker Tesla Inc (TSLA.O), of which Musk is CEO.

The subpoenas are part of Twitter’s lawsuit against Musk seeking to keep him from the deal at the price of $54.20 a share he had agreed to. A five-day trial is scheduled to begin Oct. 17 in the Delaware Chancery Court.

Experts said the subpoenas indicate Twitter wants to know what lenders, investors and advisers said to each other about Musk’s behavior after he signed the deal in late April.

“They suspect he conspired behind the scenes to blow the whole thing up,” said Minor Myers, a professor at the UConn School of Law.

Musk said on July 8 that he withdrew from the deal because Twitter allegedly violated the agreement by withholding details about fake accounts on the platform. Twitter has said the fake accounts are a distraction from the only thing that matters, which is the terms of the agreement. Musk had also said he was walking away because Twitter fired high-ranking executives and a third of its talent acquisition team, violating Twitter’s obligation to “keep the material components of its current business organization substantially intact.” read more

Musk cannot be ordered to close the deal if funding fails – provided he is not the cause of the failed funding, legal experts said.

Twitter’s subpoenas focused on what they believe was the resignation of Bob Swan, an operating partner at venture capital firm Andreessen Horowitz, who was initially in charge of Musk’s efforts to complete the financing of the deal. He was replaced by Antonio Gracias, a longtime Musk employee, according to Twitter’s lawsuit.

Brian Quinn, a professor at Boston College Law School, said Twitter seems to want to know if “Gracias played a part in getting the funding going or if he just needed to slow things down.”

Swan did not immediately respond to messages sent via LinkedIn and to Andreeesen Horowitz. Gracias did not respond to a request for comment sent to his company Valor Equity Partners.

Experts said Twitter will be interested in understanding lenders’ concerns about the number of fake accounts on the platform, and whether it was a problem for them, as Musk has suggested.

Investors were asked to communicate about the Twitter deal with those close to Musk, such as Steve Jurvetson, a former Tesla board member and current director of SpaceX, the private rocket company founded and led by Musk.

Jurvetson did not immediately respond to a request for comment sent to his Future Ventures firm.

“lol, attorneys with TWTR are sending subpoenas to friends in the ecosystem around @elonmusk,” Joe Lonsdale, a co-founder of Palantir Technologies Inc (PLTR.N), wrote on Twitter. “I have nothing to do with this, apart from a few sarcastic comments, but I got a message of ‘YOU ARE BIDDED HERE,'” he wrote.

He called Twitter’s subpoenas a “huge intimidating fishing expedition”.

Lonsdale did not immediately respond to a request for comment sent to his 8VC company.

Theodore Kittila, a Delaware attorney, said Twitter is trying to figure out what Musk said privately as he publicly tweeted that he was concerned about bots and fake accounts on Twitter.

“They’re trying to climb in there, behind the tweets,” Kittila said. “They check emails and try to guess the conversation that actually took place and what prompted him to suspend the deal.”

Musk has sent his own subpoenas over the past two days to Concentrix Solutions Corp (CNXC.O), a data analytics firm, and TaskUs USA (TASK.O), which manages the content. Musk’s subpoena questions were filed under seal.

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Reporting by Tom Hals in Wilmington, Delaware; Editing by Leslie Adler

Our Standards: The Thomson Reuters Trust Principles.

Tom Hals

Thomson Reuters

Award-winning reporter with over two decades of experience in international financial news in Asia and Europe.

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