“More and more extravagant”
Twitter filed a long-awaited lawsuit yesterday as it seeks to force Elon Musk to complete his $44 billion acquisition of the company. Twitter argues that it has every right to do so under a specific performance provision in the Transaction Agreement.
The company, with the help of lawyers from Wachtell (who also worked for Musk), fired Musk’s efforts to drop the bid, which it said was more about Tesla’s stock drop and his effect on Musk’s wealth than anything else.
“Musk is refusing to honor his obligations to Twitter and its shareholders because the agreement he signed no longer serves his personal interests,” the company said in the lawsuit, adding, “Musk apparently believes that he – unlike to all other parties subject to Delaware contract law. – is free to change its mind, trash the company, disrupt its operations, destroy shareholder value and walk away. (Musk did not respond to a request for comment.)
Here’s what else Twitter said:
The company gave everything to Musk and more on spam accounts, contrary to Musk’s claims that Twitter blocked his efforts to get the information he needed to close the deal. But even then, according to Twitter, Musk’s demands became increasingly irrational.
“From the outset, the defendants’ requests for information were designed to attempt to frustrate the agreement,” the lawsuit states. “Musk’s increasingly outlandish demands reflect not a genuine review of Twitter’s processes, but a litigation-focused campaign to try to build a record of non-cooperation on Twitter’s part.”
Bots do not count as a “significant adverse effect” that would warrant cancellation of the agreement, despite Musk’s claims that Twitter’s regulatory disclosures, which indicate that approximately 5% of its accounts are bots, were intentionally misleading. Twitter has explicitly stated in its regulatory filings that the numbers are estimates. And Musk cited solving spammers and bots as the main reason he wanted to buy Twitter, according to the lawsuit.
On April 9, the day Musk said he wanted to acquire Twitter rather than join its board, he texted Twitter Chairman Bret Taylor to tell him that “”the purge of fake users “of the platform was to be done under a private company because he thought it would ‘make the numbers terrible’,” the suit reads.
Twitter conducted its affairs in the “ordinary course” meaning consistent with the way he ran things before. The breach of a “normal course” clause has already enabled a buyer to strike a deal, including AB Stable’s acquisition of MAPS Hotels and Resorts at the height of the pandemic. Musk accused Twitter of breaking its normal course when it, among other things, slowed down hiring and fired two executives without telling him.
But Twitter argues that Musk actually wanted layoffs at the company. On April 28, shortly after Musk signed a deal to buy Twitter, he texted Taylor to tell her his “biggest concern is employee numbers and expense growth,” according to the lawsuit. . Twitter says it informed Musk’s lawyers of its decision to release the executives and that the lawyers had “raised no objections”. (The suit did not say when Musk’s lawyers were notified of these decisions.)
Musk breached the agreement by not using “reasonable best efforts” to complete the deal, and therefore has no right to terminate it.
Twitter said in its lawsuit that Musk appeared to abandon efforts to complete its debt financing. And he disappeared when Twitter executives, including Ned Segal, its chief financial officer, got in touch to discuss spam account numbers that Musk had said he was concerned about.
Musk also appeared to get rid of executives who helped him close the deal, such as Bob Swan, a former Intel CEO, according to the lawsuit. On June 23, Musk told Twitter that he had asked Swan “to back out of the transaction process because we’re not on the same page.”
And now? Musk can stick to his guns and count on digging up something embarrassing about Twitter in discovery. He can also hope that a judge will find that forcing him to close the deal would be too complicated, given the size of the transaction. He could try to strike a new deal with Twitter at a discount, or walk away with damages (but at what cost?). And he goes definitely keep tweeting.
HERE’S WHAT HAPPENS
Oil prices fall below $100 as signs of a global economic slowdown grow. U.S. benchmark prices were higher today, after plunging about 8% yesterday on worries about the economic outlook for China, the world’s largest oil importer. Meanwhile, the euro was slightly higher against the US dollar today after slipping to near parity yesterday for the first time in nearly 20 years.
A poll shows a tight race for control of Congress ahead of the midterm elections. For the first time in a national Times/Siena College survey, Democrats had a larger share of support among white college graduates than among nonwhite voters — an indication of the shifting balance of political energy in the coalition. democrat. As recently as the 2016 congressional elections, Democrats won more than 70% of nonwhite voters while losing among white college graduates.
Shoppers are always willing to pay more for drinks and snacks, according to PepsiCo. The company’s second-quarter revenue and profit, which both beat analysts’ expectations, grew faster than sales volumes, meaning the company was able to charge more for its products. But he left his earnings forecast unchanged due to uncertainties over whether it could continue.
Apple is ending its consulting contract with designer Jony Ive. Ive and Apple have agreed to stop working together, ending a three-decade run in which the designer helped define every rounded corner of an iPhone and guided the development of the Apple Watch.
All eyes on the inflation report
This morning the government will release what has become the most watched and worried economic data point of 2022 – the monthly consumer price update. Here’s what to expect:
A new peak. Economists estimate that the consumer price index, a closely watched measure of inflation, rose 8.8% in June from a year earlier, reports Jeanna Smialek of The Times. That would be the fastest 12-month pace since 1981. The increase was due to rising gas prices, rising rents and rising grocery bills.
Some encouraging signs of relief. Gas prices have fallen recently. The slide is too recent to be reflected in June data, but if it continues, it could help lower inflation. And economists are finding that food and fuel prices aside, inflation trends for all other commodities are beginning to moderate. Target, like some other retailers, recently reported that it was struggling to sell its inventory. “There is going to be a silver lining in the inflation report,” Vincent Deluard, strategist at institutional brokerage StoneX Group, told DealBook. “If you dig into the report, you’ll see gasoline, summer travel — and some of those things will fade, but they’ll fade very slowly.”
A “poorer effect” possible – but most likely not before 2023. When the stock market is strong, there’s a lot of talk about the wealth effect, the idea that a rising stock market can make people feel richer and spend more. With the stock market falling, is it possible we are seeing the opposite – a “poorer effect” – where people are spending less, leading to lower inflation?
Deluard said not to count on that, at least not until next year. Because of the concentration of wealth in America, he said, those who see their net worth drop the most in bear markets are the least likely to consume more or less depending on the economy.
For full coverage of today’s inflation report, see The Times special briefingwhich will be updated throughout the day.
“Students who already have a head start don’t need another head start.”
– Logan Roberts, a Yale student who opposes admissions preferences for children of alumni. If the Supreme Court rules against affirmative action this fall, inherited preferences could become more difficult to defend.
Crypto founders gone
Where are Su Zhu and Kyle Davies, the founders of bankrupt crypto hedge fund Three Arrows Capital? Until recently, they were known as reliable elders in the blockchain scene. But they appear to be “ghosting”, heightening fears that the collapse of the once seemingly solid business last month – which sent broker Voyager Digital out of business and had a domino effect on other companies – could leave deep scars on the crypto industry.
Zhu and Davies are ordered to report. Yesterday, a federal bankruptcy judge in New York granted the liquidators’ requests to subpoena them. The liquidators’ attorney argued that the founders failed to cooperate meaningfully or provide required information, and that attempts to find them in an office failed; it was locked and empty. “To warn the world” that the liquidators control Three Arrows’ assets, the attorney also sought an order suspending collections from any U.S. creditors. It was granted.
Three Arrows denied being uncooperative. Zhu, who had been a prolific podcaster, resurfaced on Twitter yesterday after a week-long unusual silence. He said Three Arrows was making a good faith effort to work with the liquidators, and he joined a letter from his lawyer to the plaintiffs denying their allegations and noting that “our clients and their families have received threats of physical violence”. In another attached letter, the lawyer said that as investors and shareholders – and in Zhu’s case, as a creditor of the company – his clients were concerned that the liquidators had also caused substantial losses in not exercising an option to buy crypto, possibly violating their legal duties.
But neither Zhu nor his attorney said the founders’ whereabouts or whether they would appear if subpoenaed. What is clear is that several crypto companies are already caught up in the company’s troubles, and more could join them. The judge also granted the liquidators’ request to subpoena companies linked to the failed company.
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Correction: Yesterday’s newsletter incorrectly attributed a quote. It was a spokeswoman for Sen. Patrick Toomey who made the statement to DealBook via email, not the lawmaker himself.
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