Twitter vs Musk: Judge halts lawsuit to allow deal closing

A five-day trial was scheduled to begin on October 17 and Musk expected to be deposed on Thursday.

Elon Musk
Elon Musk, founder of SpaceX and chief executive officer of Tesla Inc., said this week he would buy Twitter at the price he agreed in April, $54.20 per share, but conditioned the deal on receiving debt financing [File: Bloomberg]

A Delaware judge has ordered a halt to Twitter Inc’s lawsuit against Elon Musk until 5pm ET (9pm GMT) on October 28 to permit the billionaire’s takeover deal to close, according to a Thursday court filing.

Earlier, Twitter had expressed opposition to Musk’s request a judge halt its lawsuit against him, saying Musk should close his purchase of the company for $44bn next week and the litigation should head to trial until he closes the deal.

Musk said this week he would buy Twitter at the price he agreed in April, $54.20 per share, but conditioned the deal on receiving debt financing.

Banks are working cooperatively to fund the deal, which is expected to close on or around October 28, the court filing said.

“As a result, 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.

Musk committed to buying Twitter in April but soon soured on the deal. The social media company then went to court seeking an order for Musk to go through with the deal.

A five-day trial is scheduled to begin on October 17 and Musk was expected to be deposed on Thursday, although the parties mutually agreed to postpone his interview, sources told Reuters news agency.

Musk said lawyers representing the debt financing parties have reassured him they are prepared to honour their obligations. Continuing the litigation would require a trial and appeals, and could drag out payment to Twitter’s shareholders by months, the filing said.

“Twitter will not take yes for an answer. Astonishingly, they have insisted on proceeding with this litigation, recklessly putting the deal at risk and gambling with their stockholders’ interests,” the filing said.

Musk, who is also chief executive of Tesla Inc, asked for an immediate hearing, according to a letter to Chancellor Kathaleen McCormick of Delaware’s Court of Chancery.

Twitter shares ended the day down 3.7 percent, at $49.39, on the New York Stock Exchange.

‘A lot of mistrust’

Since Musk made his offer on Monday, talks have dragged on longer than some initially expected, according to sources close to the litigation.

Wedbush analyst Dan Ives said it “would be an understatement” to say talks between both sides were going poorly. “There is a lot of mistrust for obvious reasons,” he said.

Major banks that committed to funding $12.5bn, or about 28 percent of the deal, could be facing hefty losses as the swift pace of interest rate hikes has ratcheted up market volatility and dampened appetite for leveraged financing.

“There’s still some uncertainty based on whether or not Elon can find the actual financing to do the deal,” said Randy Frederick, managing director of trading and derivatives for the Schwab Center, .

Musk has raised $15.4bn by selling Tesla shares this year and is leaning on large investors for a chunk of the financing, leading to speculation he may sell more of the electric-vehicle maker’s stock to fund the deal.

“Financing will eventually end up going through one way or another. It is just a point of negotiating terms at this stage,” said Robert Gilliland, managing director at Concenture Wealth Management.

Source: Reuters