A judge halted the court case against Elon Musk over his purchase of Twitter Inc. for $44 billion, giving the parties until 5pm on October 28 to complete the deal.
Delaware Chancery Judge Kathaleen St. J. McCormick, said that if the deal is not made at this time, he will set trial dates in November, according to an order issued Thursday.
The ruling is a victory for Musk, who asked the judge to halt Twitter’s lawsuit against him, saying the social media company “won’t take yes for an answer” after it revived its bid to buy the. The billionaire earlier this week proposed to consummate the $54.20-per-share settlement, as long as the court “enters an immediate stay of the action” and “adjourns the trial and all other proceedings,” according to a letter dated October 3. In Musk’s filing Thursday, lawyers for the billionaire said they are now targeting an Oct. 28 closing date.
Twitter opposed his request for a halt, saying the billionaire “can and should” close the deal next week.
Talks between the two sides have stalled after Musk said his offer is now contingent on receiving $13 billion in debt financing. The original deal, which he originally proposed in April and later reneged on, contained no such contingency. Musk said Twitter is reluctant to halt legal proceedings based on the “theoretical possibility of a future failure to obtain debt financing.”
“The obstacle to ending this litigation is not, as the defendants claim, that Twitter is unwilling to take yes for an answer,” Twitter’s lawyers said in a court filing responding to the request by Musk to drop the case. “The obstacle is that the defendants still refuse to accept their contractual obligations.”
Musk’s lawyers had said that “Twitter cannot show any prejudice from a brief stay of this action to allow the parties to focus on closing,” according to the previous filing. “In the event that closure does not occur, litigation may be quickly resumed based on the facts then existing and the issues remaining at that time.”
Going forward with a trial, and the appeals that would follow, would mean the deal would take “months” to complete, Musk’s lawyers said. They requested an immediate hearing on the motion, according to a letter to the judge.
Twitter said it doubted Musk’s promises and said a banker involved in the debt financing testified earlier Thursday that Musk had not yet sent them a loan notice and otherwise had not told them he had the intention to close the deal. The banker also said that “the main task needed to close the deal – memorializing the debt financing – could have happened in July, but didn’t because Mr. Musk intended to terminate the deal.”
“Now, on the eve of trial, the defendants state that they intend to close after all,” Twitter said in its filing. “‘Trust us,’ they say, ‘this time we mean it,’ and that’s why they’re asking to be released from an account of merit.”
Musk’s proposed stay “is an invitation to more harm and delay,” the platform added. “Until the defendants agree to shut down as necessary, Twitter is entitled to its day in court.”
The two sides had been preparing for a week-long court battle on October 17, which would have determined whether the billionaire had legitimate reasons to torpedo the purchase because of the alleged fake user accounts. McCormick spoke out against the CEO of Tesla Inc. on a half-dozen pre-trial issues that could have foreshadowed difficulties in making his case in court.
Seven banks, led by Morgan Stanley, fully underwrote the debt portion of the financing, according to an April filing. As is common in this type of deal, the banks initially planned to sell most of that debt to institutional money managers before the Twitter deal closed, but they’ve always been on the hook to provide the financing if something went wrong. .
There are very few, if any, ways for banks to get out of offering these debt commitments after signing the contract. And most banks wouldn’t want to do that, even if it meant avoiding losses, because pulling out would reflect poorly on their investment banking business and could hurt their ability to win new deals with companies and private equity firms in the future .
A Morgan Stanley representative declined to comment on Musk’s deal.
Bloomberg previously reported that as part of the talks with Twitter, Musk has also been looking to reserve his rights to file a fraud lawsuit over his claims that the platform’s executives misled him and other investors about the number of spam and bot accounts among its more than 230 million users.
Alex Spiro, Musk’s lawyer, said in a statement that Twitter had offered to take “billions” off its sale price in exchange for “self-serving terms” that Musk refused. Twitter did not respond to a request for comment on Spiro’s statement or the terms of the settlement it is seeking.
The case is Twitter v. Musk, 22-0613, Delaware Chancery Court (Wilmington).
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