Elon Musk is pleading with Twitter executives to end their lawsuit against him in order to provide him with more time to come up with the funds for his $44 billion takeover of the company.
In a filing with Delaware’s Court of Chancery on Thursday, lawyers for the Tesla CEO asked a judge to put a pause on the upcoming trial against Twitter pending the ‘closing of the transaction.’
They argue that Twitter should drop the nonjury trial scheduled for October 17, so that the necessary financing can be pulled together to wrap up the acquisition by October 28 after Musk reversed course earlier this week and proposed proceeding with the agreed-upon deal.
‘There is no need for an expedited trial to order defendants to do what they are already doing and this action is now moot,’ said the filing.
It comes after several of the banks that agreed to fund his takeover backed out of their agreement.
But according to the new filing, lawyers representing the debt financing parties have reassured the billionaire that they are prepared to honor their obligations, and proceeding with a lawsuit could drag out payment for months.
Elon Musk is pleading with Twitter executives to end their lawsuit against him, to provide him with time to come up with the funds for his $44 billion takeover of the company
‘Not only has Twitter’s baseless speculation been refuted by the banks themselves, any theoretical claims Twitter could concoct based on a potential financing failure that has not happened are unripe and unpled, making them well outside the scope of the trial set to begin in eleven days,’ the filing reads.
They say it could ‘impede the deal moving forward.’
‘Twitter will not take yes for an answer,’ Musk’s lawyers claim in the document. ‘Astonishingly, they have insisted on proceeding with this litigation, recklessly putting the deal at risk and gambling with their stockholders´ interests.’
‘Proceeding toward trial is not only an enormous waste of party and judicial resources, it will undermine the ability of the parties to close the transaction.’
Musk’s lawyers conclude that ‘in the event a closing does not occur, the litigation can promptly resume based on the then-existing facts and whatever issues remain at the time.’
Following the news, shares of Twitter plunged more than 3 percent, trading at $49.44 as of 4pm Thursday.
Musk says that if they stay the trial he could make up the money. Twitter CEO Parag Agrawal is pictured here
Following the news, shares of Twitter plunged more than 3 percent, trading at $49.44 as of 4pm Thursday
The announcement comes hours after both sides agreed to delay the Tesla CEO’s deposition as they tried to finalize the terms of his $44 billion takeover.
Among the many issues they are said to be discussing is whether the Tesla CEO will try to make the deal contingent on his original $12.5 billion debt-financing package, as banks try to weasel their way out of the agreement.
The banks could argue that Musk’s antics in delaying the agreement have sufficiently damaged Twitter, enough to qualify as a material adverse effect, letting them walk away, the New York Times reports.
And Musk could even foil his own deal by refusing to sign a letter certifying Twitter is solvent, though the judge in the case is likely to force the billionaire to sue the banks for the agreed-upon money under the New York law that governs them.
Twitter executives, on the other hand, are trying to make sure Musk won’t back out of his agreement again, seeking a reaffirmation of the specifics in the previously-agreed-to contract.
They are also considering options like court supervision of the closing process, and requesting that Musk pay interest to make up for the delays.
Musk surprised investors on Monday when he suddenly announced he would abide by his April agreement to buy the company at $54.20 a share if Twitter dropped its litigation against him
Musk surprised investors on Monday when he suddenly announced he would abide by his April agreement to buy the company at $54.20 a share if Twitter dropped its litigation against him.
But the proposal included a condition that the deal closing was contingent on the necessary debt financing.
It is likely that an agreement between the two parties would remove that condition, a Reuters source familiar with the negotiations previously said, after Apollo Global Management and Sixth Street backed out of the agreement to help fund the buyout.
The two firms were not among the 18 equity investors named in a May SEC filing listing Musk’s backers, but had previously been part of talks looking at providing about $1 billion in financing for the deal.
Those talks have now ended, sources familiar with the matter told Reuters on Wednesday.
Chancellor Kathaleen McCormick said Wednesday that the trail remains on track until the parties reach an agreement
Musk has since said he would finance the deal with his own cash, co-investors and bank financing as historic inflation, rising interest rates and economic uncertainty caused by the war in Ukraine make such deals more costly for lenders.
When investor banks fund a leveraged buyout, they usually try to offload the debt to outside investors, like hedge funds or other large institutions.
The banks then make money from the fees they charge to arrange these deals, and they sell the debt to reduce their risks in case borrowers cannot repay.
But under the current economic situation, it is much more difficult for the banks to offload that debt — and doing so could lose them significant sums of money.
It remains unclear what impact, if any, the withdrawal of Apollo and Sixth Street might have on the structure of the deal.
The $12.5 billion in debt financing from the banks is ironclad, according to the analyst Ives, who wrote that ‘the banks are essentially cemented to this Twitter debt deal and we see no way out despite the very tough debt markets today.’
‘We continue to believe the deal gets done smoothly despite some late night poker moves from the Twitter camp with the Delaware Court case around the corner,’ he wrote in a note on Wednesday night.