India@75: A nation in the making

What Twitter's subpoenas say about its plan to fight Elon Musk in court

The subpoenas are part of efforts to help determine whether Musk had quietly abandoned his deal to acquire Twitter even before he told it of his plans to do so, which would breach his contract with the company, said two people familiar with Twitter's thinking

By Lauren Hirsch
Published: Aug 3, 2022

What Twitter's subpoenas say about its plan to fight Elon Musk in courtTwitter is also requesting information about Elon Musk’s decision to scrap his loan against his Tesla shares to help finance the deal. Image: JIM WATSON / AFP

Twitter has sent dozens of subpoenas in recent days to the banks and investors that were backing Elon Musk in his bid to acquire the company, while also seeking more information about well-known technology industry personalities who are considered close to Musk.

The subpoenas are part of efforts to help determine whether Musk had quietly abandoned his deal to acquire Twitter even before he told it of his plans to do so, which would breach his contract with the company, said two people familiar with Twitter’s thinking, who requested anonymity because the discussions were private.

Under the terms of the deal, Musk must use “reasonable best efforts” to close the sale, including securing debt financing for the $44 billion purchase. But Twitter claims in a lawsuit against Musk in Delaware Chancery Court that he appeared to have abandoned efforts to complete his financing, contravening the agreement.


Musk signed commitment letters with a number of Wall Street banks, led by Morgan Stanley, for a total of $13 billion in debt financing. He later brought in Silicon Valley investors, including the venture capital firm Andreessen Horowitz, to provide about $7 billion in financing.

In subpoenas sent to investment banks working for Musk, including Morgan Stanley, Barclays and Bank of America, Twitter demanded information related to his efforts to consummate his debt financing, including his expected timeline for doing so. Twitter is also requesting information about Musk’s decision to scrap his loan against his Tesla shares to help finance the deal.

Musk had originally planned to take out a roughly $12 billion loan against his Tesla stock. But shares of the electric-vehicle maker plummeted in the weeks after he signed the deal, making such a loan considerably more risky.

Twitter also asked for more information about any analysis that banks have done at Musk’s instruction about the number of fake users on its platform. He has cited his concerns about fake accounts on Twitter as a reason he wants to withdraw his offer.

What Musk’s bankers demanded — and why — could be crucial for the deal. Twitter’s ability to sue Musk to force him to close the deal, under its “specific performance clause,” is voided if his debt financing falls apart. But that escape works only if the banks, which have signed commitment letters, walk away independently — not if Musk prods them.

Check out our Festive offers upto Rs.1000/- off website prices on subscriptions + Gift card worth Rs 500/- from Eatbetterco.com. Click here to know more.

©2019 New York Times News Service

Show More
Post Your Comment
Required
Required, will not be published
All comments are moderated