The Tesla CEO is seeking release from the $44 billion Twitter takeover deal he tried to cancel.
Elon Musk has accused Twitter of fraud in a countersuit over his failed $44 billion deal for the social media company, which he claims withheld necessary information and misled his team about the true size of his user base.
The billionaire and Tesla CEO’s countersuit alleges that Twitter committed fraud, breach of contract and violation of a securities law in Texas, where Musk lives.
Musk’s counterclaims were filed confidentially last week and unsealed in a filing Thursday night in Delaware Chancery Court.
Musk offered to buy Twitter earlier this year, then tried to walk away from the deal, claiming the social platform was infested with more “spam bots” and fake accounts than Twitter n had revealed.
Twitter sued to force it to complete the acquisition. Musk responded by filing his counterclaim.
Musk’s attorneys argue in the countersuit that Twitter’s “misrepresentations or omissions” distorted the value of the company and caused Musk to agree in April to buy it at an inflated price. They said Twitter’s own disclosures revealed it had 65 million fewer “monetizable daily active users” who can see digital ads than Twitter’s claimed 238 million.
The filing also says that most of Twitter’s ads are only served to a portion of the company’s user base.
Musk’s team also accused Twitter of making too many major changes in the past few months without consulting Musk, including personal decisions and allegedly disobeying social media restrictions imposed by the Indian government, which is Twitter’s third market. Musk had pledged to make Twitter a haven for free speech, but also said he had to comply with local laws where he operates.
Twitter called Musk’s reasoning “a story, devised for the purpose of escaping a merger deal that Musk no longer found appealing.” The company, in particular, disputed Musk’s estimate of the fake accounts, saying the analysis relied on a “generic web tool” that flagged Musk’s own Twitter account as a likely bot.
“The result is a distortion that it is hoped will nevertheless make waves,” said Twitter’s response.
The case is due in court on October 17. The legal battle is gathering pace as preparations have begun for the five-day trial in Delaware’s Chancery Court, which specializes in complex, high-stakes business battles.
This battle stems from Musk courting Twitter’s board with an offer of $54.20 per share in April, then July, announcing he was ending their deal because the company had misled him regarding its tally of fake accounts and spam.
Twitter, whose shares rose about 3.5% to $42.51 on Friday, stuck to its estimate that less than 5% of activity on the platform is due to software ‘bots’ rather than people.
The social media platform urged shareholders to approve the deal, setting a vote on the merger for September 13.
While answering questions at a Tesla annual shareholder meeting on Thursday, Musk was asked if his potential ownership of Twitter could distract from his management of the electric car company.
“I think Tesla, you know, would still do very well even if I was kidnapped by aliens or returned to my home planet,” he joked, drawing laughs and applause. “To be honest, I don’t have an easy answer,” Musk added. He assured shareholders that, at this time, he has no plans to step down from his role as Tesla chief.