Tesla CEO Elon Musk lost his fight to delay Twitter's lawsuit against him as a Delaware judge on Tuesday set an October trial, citing the 鈥渃loud of uncertainty鈥� over the social media company after the billionaire backed out of a deal to buy it.
鈥淒elay threatens irreparable harm,鈥� said Chancellor Kathaleen St. Jude McCormick, the head judge of Delaware's Court of Chancery, which handles many high-profile business disputes. 鈥淭he longer the delay, the greater the risk.鈥�
Twitter had asked for an expedited trial in September, while Musk's team called for waiting until early next year because of the complexity of the case. McCormick said Musk's team underestimated the Delaware court's ability to 鈥渜uickly process complex litigation.鈥�
Twitter is trying to force the billionaire to make good on his April promise to buy the social media giant for $44 billion - and the company wants it to happen quickly because it says the ongoing dispute is harming its business.
鈥淚t's a very favorable ruling for Twitter in terms of moving things along,鈥� said Carl Tobias, a law professor at the University of Richmond. 鈥淪he seemed very concerned about the argument that delay would seriously harm the company, and I think that's true.鈥�
Musk, the world's richest man, pledged to pay $54.20 a share for Twitter, but informed the company in July that he wants to back out of the agreement.
鈥淚t's attempted sabotage. He's doing his best to run Twitter down,鈥� said attorney William Savitt, representing Twitter before McCormick on Tuesday. The hearing was held virtually after McCormick said she tested positive for COVID-19.
Musk has claimed the company has failed to provide adequate information about the number of fake, or 鈥渟pam bot,鈥� Twitter accounts, and that it has breached its obligations under the deal by firing top managers and laying off a significant number of employees. Musk's team expects more information about the bot numbers to be revealed in the trial court discovery process, when both sides must hand over evidence.
Twitter argues that Musk's reasons for backing out are just a cover for buyer's remorse after agreeing to pay 38% above Twitter's stock price shortly before the stock market stumbled and shares of the electric-car maker Tesla, where most of Musk's personal wealth resides, lost more than $100 billion of their value.
Savitt said the contested merger agreement and Musk's tweets disparaging the company were inflicting harm on the business and questioned Musk's request for a delayed trial, asking 鈥渨hether the real plan is to run out the clock.鈥�
鈥淗e's banking on wriggling out of the deal he signed,鈥� Savitt said.
But the idea the Tesla CEO is trying to damage Twitter is 鈥減reposterous. He has no interest in damaging the company,鈥� said Musk attorney Andrew Rossman, noting he is Twitter's second largest shareholder with a 鈥渇ar larger stake鈥� than the company's entire board of directors.
Savitt emphasized the importance of an expedited trial starting in September for Twitter to be able to make important business decisions affecting everything from employee retention to relationships with suppliers and customers.
Rossman said more time is needed because it is 鈥渙ne of the largest take-private deals in history鈥� involving a 鈥渃ompany that has a massive amount of data that has to be analyzed. Billions of actions on their platform have to be analyzed.鈥�
Tobias said it's still possible that Musk and Twitter will settle the case before it goes to trial, since both might find a drawn-out fight or the judge's final decisions costly to their businesses and reputations. One option is that Musk could pay the $1 billion breakup fee both he and Twitter agreed to if either was deemed responsible for the deal falling through. Or Twitter could push for him to pay more to make up for damages - just not the full $44 billion acquisition.
鈥淒oes Musk really want to run that company? Do they really want Musk to run that company?鈥� Tobias said. 鈥淭hey could always settle somewhere in between.鈥�
