Elon Musk’s legal team is building up a strong case for extricating the billionaire from the $54.20/share deal to buy Twitter, Inc. TWTR.
What Happened: Musk’s team served a third notice of termination to Twitter, citing a third basis, according to an amended 13D filing with the SEC that included a letter addressed to Twitter’s Chief Legal Officer Vijaya Gadde.
Musk alleged that Twitter violated a provision in the merger agreement dated April 25 that required the social media platform not to provide any severance or termination payments or benefits to any service provider, except under exceptions, between the signing and closing of the agreement.
A Wall Street Journal report said this week that Twitter paid $7 million to Peiter Zatko, its former security head, as part of a settlement related to his lost compensation.
Zatko, aka Mudge, in the hacker community, later came out to accuse Twitter of compromising user safety and security and filed whistleblower complaints with federal agencies, including the SEC and the Department of Justice.
Musk learned of this payment when Twitter filed the separation agreement with the court on September 3, and due to the violation of a section of the merger agreement, he is not required to close the deal and has an additional basis to terminate the agreement, the letter signed by Musk’s lawyer Mike Ringler asserted.
Why It’s Important: The billionaire had previously cited the anomaly in the calculation of the bot account as the reason for terminating the deal in the first termination letter sent on July 8. Later, on Aug. 30, he issued another termination letter, citing undisclosed additional bases, although it was believed to be due to the allegations made by Zatko.
Musk’s legal team had asked for additional time from the judge investigating the case filed by Twitter to enforce the deal, citing the time required to look into the charges. Judge Kathaleen McCormick of the Delaware Chancery Court denied the request, but agreed to include the whistleblower claims in the case.
The five-day trial is set to start on Oct. 17.
Twitter closed Friday’s session up 0.81% at $42.19, according to Benzinga Pro data.
Photo: Created with an image from Daniel Oberhaus via Flickr