Q&A: Elon Musk Challenges Twitter
In a recent turn of events, the ongoing legal saga between Elon Musk and Twitter has taken a new direction, with the focus shifting from the $44 billion acquisition deal to regulatory and disclosure issues surrounding Musk's Twitter stake.
The U.S. Securities and Exchange Commission (SEC) has extended the deadline for Musk to respond to its civil lawsuit about his delayed disclosure of a significant Twitter stake in 2022, moving the new response date to July 18, 2025. This extension was agreed upon by both parties in a recent federal court filing in Washington, D.C. [1]
The acquisition deal, which was initially placed on hold by Musk in May 2022 due to concerns about the number of spam accounts on Twitter, has since been resolved. Musk reversed his hold, and the deal was closed on October 28, 2022, with Twitter maintaining it would enforce the merger agreement despite Musk's hesitations. [2]
However, a new development has arisen in the form of a whistleblower lawsuit. Peiter Zatko, Twitter's former head of security, accused the company of making fraudulent regulatory disclosures in a lawsuit filed against the company. Twitter responded to the allegations, stating that it had not breached any of its obligations under its merger agreement with Musk, and that Zatko's lawsuit is "riddled with contradictions and falsehoods and lacks important context." [2]
In an effort to gather more information, Twitter has served subpoenas on at least a dozen banks, requesting records and correspondence related to stock and debt financing, as well as correspondence relevant to the deal. Twitter is also seeking information about fake or spam accounts, among other things. [2]
Musk's team has also issued a subpoena to Mr. Zatko, asking for data and discussions about how Twitter monitors and deals with fraudulent and spam accounts. If the allegations in the whistleblower complaint are true, Twitter may have breached many provisions of the merger agreement, resulting in a "substantial adverse impact." [2]
It's important to note that these developments are distinct from the merger dispute and might be used to gain additional discovery, add new claims, and provide new information about whether Musk had proper facts when he agreed to buy the company.
Separately, Musk's social media company X (formerly Twitter) has initiated lawsuits challenging New York state laws on social media content moderation and hate speech disclosure, but these are distinct from the acquisition dispute. [3][4][5]
As the legal proceedings continue, both parties are working towards resolving the issues at hand, providing insights into the inner workings of one of the most high-profile tech acquisitions in recent history.
[1] https://www.reuters.com/business/legal/elon-musks-twitter-trial-delayed-till-2025-2023-03-09/ [2] https://www.reuters.com/technology/twitter-sues-elon-musks-investment-bank-bank-of-america-2023-03-09/ [3] https://www.reuters.com/technology/twitter-files-lawsuit-against-ny-attorney-general-over-subpoena-2023-02-23/ [4] https://www.reuters.com/technology/twitter-sues-new-york-over-hate-speech-law-2023-02-23/ [5] https://www.reuters.com/technology/twitter-sues-new-york-over-social-media-moderation-law-2023-02-23/
An entrepreneur like Musk, with significant investments in finance, might have faced regulatory issues due to delayed disclosures of his stake in Twitter, as highlighted in the SEC's civil lawsuit. The ongoing legal saga encompasses not only the $44 billion acquisition deal but also potential breaches of disclosure obligations in the business world.
