Twitter hires US law firm Wachtell to sue Elon Musk for ending €43bn takeover

Twitter has hired elite law firm Wachtell, Lipton, Rosen & Katz as it readies for a legal battle against Elon Musk, who has moved to terminate his $44 billion (€43bn) acquisition of the social media company, according to two people familiar with the situation.

The San Francisco company is preparing to file its lawsuit with the Delaware court of chancery against Mr Musk early this week, one of the people said.

Mr Musk said on Friday that he planned to walk away from his deal to buy Twitter, citing three breaches of the merger agreement by the social media platform.

In response, Twitter vowed to hold the mercurial billionaire to his original deal terms and price of $54.20 per share, in what could develop into a messy legal fight that would dictate the future of the company.

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Wachtell Lipton has perhaps the leading litigation practice in Delaware, where the majority of US public companies are incorporated. It defends companies in lawsuits over breach of fiduciary duty and broken merger agreements in the state.

Twitter declined to comment on Wachtell’s appointment, which was first reported by Bloomberg. Wachtell did not immediately respond to a request for comment.

Twitter has an incentive to push the deal through or extract a larger break fee from Mr Musk than the $1 billion already agreed. Its share price has declined by more than 30 per cent since the Tesla chief made his offer and no other buyers have emerged.

The company has been plunged into crisis, announcing mass lay-offs and cost-cutting measures in recent weeks.

Twitter is likely to argue that Musk’s concerns simply mask buyer’s remorse over a pricey and highly leveraged deal, amid a broader rout in tech stocks. It is an interpretation shared by many analysts and legal experts.

“We see Elon Musk’s unsubstantiated claims that [Twitter] is misleading investors about the [percentage] of fake accounts as an excuse to back out of the deal,” Brent Thill, equity analyst at Jefferies, wrote on Sunday in a research note.

Twitter has long made its 5 per cent figure public, “making us question the validity of Musk’s concerns”, he added.

Eric Talley, a Columbia law professor, said Musk’s arguments were “notably thin”, given that Twitter’s disclosures on fake accounts note that they are estimates. - Copyright The Financial Times Limited 2022