Elon Musk seeks to amend Twitter lawsuit, citing whistleblower
Elon Musk is asking a Delaware judge to let him amend his counterclaims against Twitter, after saying earlier that new whistleblower revelations add to his argument to walk away from his $44-billion purchase of the social media company.
Lawyers for Musk and Twitter traded barbed letters Tuesday over how a whistleblower’s accusations of “egregious deficiencies†at the company will affect the scuttled deal and lawsuits that have ensued.
Although the billionaire’s request was filed in court Tuesday under seal, one attachment detailed a report to Congress from former Twitter security chief Peiter Zatko. In his whistleblower complaint last week, Zatko said he raised concerns over the number of robot and spam accounts but company officials ignored him.
In a separate securities filing, lawyers for Musk said the allegations by Zatko meant that Twitter had breached the terms of the merger agreement. Shortly after, Twitter’s lawyers responded, saying Musk’s case for termination of the deal is “invalid and wrongful.†Zatko is scheduled to testify before Congress on Sept. 13.
Musk has been trying for months to extract himself from the takeover of Twitter, initially saying that the company’s user figures are inflated by millions of robot accounts. Twitter sued Musk in Delaware over the failed deal. Zatko’s claims, which emerged last week, have given Musk’s side new ammunition.
The billionaire leader of Tesla and SpaceX says Twitter must go private to fulfill its “societal imperative.†But the way he went about offering to buy it left Wall Street doubting his seriousness.
A trial is set for Oct. 17, though Musk’s lawyers on Tuesday sought to move it to November.
Delaware Judge Kathaleen St. J. McCormick probably will allow Musk to amend his complaint because it’s rare for such requests to be denied and the allegations by Zatko raise “really important†issues, said Robert Miller, a law professor at the University of Iowa.
Twitter has argued in court filings that it hasn’t breached any of its obligations to Musk and maintains that Zatko’s complaint is “riddled with inconsistencies and inaccuracies and lacks important context.â€
The company has said that spam and bots make up less than 5% of the social media network’s accounts. Musk says as much as a third of Twitter’s more than 230 million users may fall into the bot category.
As the legal fight escalates, two prominent shareholder advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., are urging Twitter’s investors to support Musk’s takeover.
ISS said that although the situation is unique, investors should focus on the details of the proposal itself instead of the noise around it. Glass Lewis said the offer price would allow shareholders a relatively attractive exit price and a premium for the company’s unaffiliated shareholders.
Bloomberg writers Matthew Bultman and Giles Turner contributed to this report.
