JAKARTA - Twitter Inc. began its counterattack against Elon Musk on Monday, July 11. The US social media company accused the world's richest man of "knowingly" violating an agreement to buy their company, days after the head of Tesla Inc attempted to back out of a $44 billion deal.
In a letter sent to Musk, dated July 19, and submitted to regulators on Monday, Twitter said it had not breached its obligations under the merger agreement as Musk demonstrated on Friday, July 8, in wanting to end the deal.
"Twitter has not suffered and is unlikely to suffer any Material Adverse Effects of the Company," he added, as quoted by Reuters.
The company had planned to sue Musk and force him to complete the acquisition deal. It's a threat he laughed off last Monday. Twitter plans to file a lawsuit earlier this week in Delaware, a person familiar with the matter told Reuters.
Twitter also said in the letter that the merger agreement remained in effect, adding it would take steps to close the deal.
Twitter shares ended down 11.3% at 32.65 dollars on Monday. This price is down 40% from Musk's bid of $54.20 and is the biggest daily percentage drop in more than 14 months.
"Twitter's board should think about the potential harm to its employees and shareholder base from any additional internal data that is revealed in litigation," said Benchmark analyst Mark Zgutowicz.
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Francis Pileggi, a corporate litigator with Lewis Brisbois in Delaware, said Musk could put the bots front and center in litigation if he defends Twitter's lawsuit by claiming the company misrepresented the number of fake accounts.
"I wonder if he was barred from getting that information," said Pileggi.
Pileggi said if the number of fake accounts was many times higher than the 5% estimated by Twitter, it could lead to negotiations for price reductions for the social media platform.
Legal experts say the 16-year-old social media company has a strong legal case against Musk, but could choose renegotiation or settlement over a lengthy court battle.
"We believe that Elon Musk's intention to end the merger is based more on the recent market sell-off than Twitter's 'failure' to meet his demand," Jefferies analyst Brent Thill wrote in a note. "In the absence of a deal, we wouldn't be surprised to see stocks find declines to $23.5."
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