Legal experts said Twitter Inc. is attempting to find evidence that Elon Musk torpedoed the financing of his $44 billion takeover deal for the social media company while trying to backtrack from the agreement.
According to filings over the past two days, Twitter this week sent dozens of civil summons to co-investors in the deal, including units of global banks such as Morgan Stanley, Brookfield Asset Management Inc. and affiliates of Musk Advisors. Delaware Court of Chancery.
Morgan Stanley declined to comment. Brookfield did not immediately respond to a request for comment. Representatives for Musk and Twitter could not be reached.
The summons looks for documents and communications related to the deal, it’s financing, and any information on “bots” or fake Twitter accounts. They also want information recipients may have about the potential impact on the deal from a change in the stock price of electric car maker Tesla Inc., of which Musk is a chief executive officer.
The subpoenas are part of Twitter’s lawsuit against Musk, seeking to hold him to the deal at the $54.20 per share price he had agreed to. A five-day trial is scheduled to begin on Oct. 17 in the Delaware Chancery Court.
Experts said the subpoenas indicate Twitter wants to know what lenders, investors and advisers were saying to each other about Musk’s behaviour after he signed the deal in late April.
“They suspect that behind the scenes, he’s been conspiring to blow the whole thing up,” said Minor Myers, a UConn School of Law professor.
Musk said on July 8 that he was backing out of the deal because Twitter allegedly breached the agreement by withholding data about fake accounts on the platform. Twitter has said the fake accounts are a distraction from the only issue that matters, which is the terms of the agreement. Musk had also said he was walking away because Twitter fired high-ranking executives and one-third of the talent acquisition team, breaching Twitter’s obligation to “preserve substantially intact the material components of its current business organization.”
According to legal experts, musk cannot be ordered to close the deal if financing fails — provided he’s not the cause of the failed funding.
Twitter’s subpoenas focused on what they said was the firing of Bob Swan, an operating partner at venture capital firm Andreessen Horowitz, who initially led Musk’s efforts to finalize deal finance. According to Twitter’s lawsuit, he was replaced by Antonio Gracias, a long-time Musk associate.
Brian Quinn, a Boston College Law School professor, said Twitter wants to know if “Gracias had any role in getting financing done or if he was just supposed to slow things down.”
Swan did not immediately respond to emails sent via LinkedIn and Andreessen Horowitz. Gracias did not respond to a request for comment sent to his Valor Equity Partners firm.
Experts said Twitter would be interested in understanding lenders’ concerns about the number of fake accounts on the platform and whether it was an issue for them, as Musk has suggested.