Delaware Chancery Court Sets 5-Day Trial in October for Twitter’s Suit vs. Elon Musk

Twitter asked Chancellor Kathaleen St. Jude McCormick, chief judge of the Delaware Chancery Court, for a four-day trial in September in its bid to force Elon Musk to go through with his $44 billion acquisition of the company. Musk asked for a 10-day trial next February. McCormick’s ruling fell somewhere in the middle. The judge ruled for a five-day trial in October, noting in her remarks that the longer the potential transaction remains on old, the more risk of irreparable harm to Twitter. The hearing Tuesday was the first time the legal teams for the two parties appeared in court together. Andrew Rossman of Quinn Emanuel, representing Musk, asked for more time to verify that fewer than 5% of Twitter’s 229 million monetizable daily active users are bots, fake accounts or spam accounts, saying during the hearing that Musk “has arguably more risk at stake than Twitter does if he ends up being forced to buy this company,” and that he ” doesn't have an incentive to keep this hanging for a long time.” William Savitt of Wachtell, Lipton, Rosen & Katz, representing Twitter, countered that the social network has admitted that there are caveats to the data it provided to Musk’s team that indicate that the number of spam accounts could be higher, alleging that Musk wants to back out of the deal due to a decrease in his personal wealth. Shares in Twitter closed trading Tuesday at $39.49 apiece, while Musk’s original deal to acquire the company valued it at $54.20 per share. The dance between Musk and Twitter began when Musk purchased 9.2% of Twitter’s stock March 14, although he did not file a Schedule 13G form with the SEC until April 4. The day after the Schedule 13G was revealed, Musk was added to Twitter’s board of directors, only to inform CEO Parag Agrawal April 10 that he would not join the board after all. Twitter revealed April 25 that it officially entered into an agreement to be acquired by an entity wholly owned by Musk, with the transaction valued at approximately $44 billion, or $54.20 per share in cash, which would make Twitter a private company upon closure of the deal. Musk revealed in an SEC filing May 5 that he would serve as Twitter’s interim CEO once the transaction closed. The Federal Trade Commission said the following day that it was conducting an antitrust review of the agreement over concerns that free speech could be threatened. A 5:44 a.m. ET tweet from Musk May 13 questioned Twitter’s assertion that spam and fake accounts represent fewer than 5% of its monetizable daily active users. Agrawal responded in a lengthy tweet thready 16, in which he admitted that spam affects Twitter’s user experience, noted that the platform suspends more than 500,000 spam accounts per day and added, “Unfortunately, we don’t believe that this specific estimation can be performed externally, given the critical need to use both public and private information (which we can’t share). Externally, it’s not even possible to know which accounts are counted as mDAUs (monetizable daily active users) on any given day.” Musk then replied with the poop emoji heard round the tech world. In June, Musk threw something a little more substantial than a poop emoji at Twitter, sending a letter to the company, also filed with the SEC, in which he threated to cancel the acquisition due to his uncertainty about the extent of fake accounts, bots and spam on the platform. Twitter responded last month by providing access to its full firehose of data, encompassing roughly 500 million tweets per day, but this was not enough to satisfy Musk and his team. Musk filed a letter with the SEC July 8 calling off the deal, with Twitter chairman Bret Taylor responding in a tweet shortly thereafter that the company’s board was committed to closing the transaction and would pursue legal action to enforce the merger agreement, adding, “We are confident that we will prevail in the Delaware Court of Chancery.”