Elon Musk might not appear in Delaware court after all.
Musk, the billionaire owner of Tesla, has offered to close his $44 billion deal to buy Twitter, according to reports from the Wall Street Journal and Bloomberg. The $44 billion price tag is the amount Musk originally agreed to. It equals $54.20 per share.
Musk’s lawyers filed a confidential letter with Delaware Chancery Court Tuesday morning. The Wall Street Journal, citing people familiar with the matter, reported Musk’s team communicated the proposal to Twitter’s lawyers overnight Monday.
A trial in Delaware Chancery Court is scheduled to start on Oct. 17.
Preparations for the trial were well underway ahead of Tuesday’s report with lawyers representing Musk and Twitter hashing out several discovery arguments in the past few weeks. Musk was scheduled to give a deposition Thursday and Friday in Wilmington at the office of the law firm Potter Anderson & Corroon. A court filing submitted late Monday moved the closed-door deposition to a law firm in Austin, Texas.
An emergency hearing is now scheduled Tuesday to discuss Musk’s proposals, the Wall Street Journal reported.
How did we get here?
Musk offered to buy Twitter for $54.20 per share in April.
He said the company has the “potential to be the platform for free speech around the globe.” At the time of his offer, he said Twitter would not reach this potential in its current state and was better organized as a private company.
Musk, who has more than 107 million Twitter followers, regularly posts updates about his business, memes, polls and other jokes on the platform.
Twitter appeared initially reluctant, but accepted Musk’s offer after weeks of back and forth.
Musk in July backed out of the deal saying that the company made “misleading representations” over the number of spam bots on the service. Twitter sued Musk days later for violating their agreement.
What is Musk’s argument?
Musk contends Twitter misled him about the size of its user base and specifically the prevalence of bots or spam accounts on the platform. Musk says the account totals provided by Twitter give a “misleading representation” of the size of the platform.
Musk has also argued that Twitter failed to operate its normal course of business. Musk said Twitter slowed its hiring and did not give him notice before firing two executives as the deal was closing.
What is Twitter’s argument?
Twitter has called Musk’s exit plan a “model of hypocrisy” and a “model of bad faith.”
The company says it disclosed necessary information regarding spam accounts and that the amount of spam accounts on the platform do not have a “material adverse effect.” Twitter says it ran its business as it normally would as the deal was closing and kept Musk updated.
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The company said Musk breached the agreement by stopping efforts to close and disparaging the company via Twitter.
Why is the case being heard in Delaware?
About two-thirds of Fortune 500 companies are incorporated in Delaware. Twitter is one of them.
The social media platform does not have a physical presence in the state, but is incorporated here for several reasons. Delaware’s unique business court is perhaps chief among them. It’s the arena for this dispute because Twitter is incorporated here.
Over two centuries, the Delaware Chancery Court has decided thousands of corporate cases making the result of disputes held there more predictable. In lieu of juries, it relies on five appointed judges who provide detailed reasoning for their decisions. As one of only three states with a separate chancery court, the Chancery Court in Delaware also offers relatively quick resolutions.
Chancellor Kathaleen McCormick assigned herself to the case and has received acclaim from legal observers for making quick rulings during the preliminary stages of the case.
Has Musk appeared in Delaware before?
A year ago, Musk testified in a shareholder lawsuit over whether Musk and the directors of his electric car company Tesla breached their fiduciary duties when they agreed to a $2 billion deal to buy SolarCity, a struggling solar-panel installing company founded by his two of his cousins with his help.
The court sided with Musk in April.
Contact Brandon Holveck at bholveck@delawareonline.com. Follow him on Twitter @holveck_brandon.
