Elon Musk seeks to amend Twitter lawsuit after saying whistleblower claims bolster his bid to abandon takeover deal

Elon Musk
Tesla CEO Elon Musk addresses guests at the Offshore Northern Seas (ONS) meeting in Stavanger, Norway, on Aug. 29, 2022.

Elon Musk is asking a Delaware judge to let him amend his counterclaims against Twitter Inc., after saying earlier that new whistleblower revelations add to his argument to walk away from his $44 billion purchase of the company.

Lawyers for Musk and Twitter traded barbed letters Tuesday over how a whistleblower’s accusations of “egregious deficiencies” at the company will affect the scuttled deal and lawsuits that have ensued.

While the billionaire’s request was filed in court Tuesday under seal, one attachment detailed a report to Congress from former Twitter security chief Peiter Zatko. In his whistleblower complaint last week, Zatko said he raised concerns over the number of robot and spam accounts, but company officials ignored him. 

In a separate securities filing, lawyers for Musk said the allegations by Zatko meant that Twitter had breached the terms of the merger agreement. Shortly after, Twitter’s lawyers responded, saying Musk’s case for termination of the deal is “invalid and wrongful.” Zatko is scheduled to testify before Congress on Sept. 13.

Musk has been attempting for months to try and extract himself from the takeover of Twitter, initially claiming that the company’s user figures are inflated by millions of robot accounts. Twitter sued Musk in Delaware over the failed deal. Zatko’s claims, which emerged last week, have given Musk’s side new ammunition.

A trial is set for Oct. 17, though Musk’s lawyers on Tuesday sought to move it to November. 

Delaware Judge Kathaleen St. J. McCormick probably will allow Musk to amend his complaint, because it’s rare for such requests to be denied and the allegations by Zatko raise “really important” issues, said Robert Miller, a law professor at the University of Iowa.

Twitter has argued in court filings that it hasn’t breached any of its obligations to Musk and maintains that Zatko’s complaint is “riddled with inconsistencies and inaccuracies and lacks important context.” 

The company has maintained that spam and bots make up fewer than 5% of the social-media network’s accounts. Musk claims as much as a third of Twitter’s more than 230 million users may fall into the bot category.

As the legal fight escalates, two prominent shareholder advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., are urging Twitter’s investors to support Musk’s takeover. 

ISS said that while the situation is “unique,” investors should focus on the details of the proposal itself instead of the noise around it, while Glass Lewis said the offer price would allow shareholders a relatively attractive exit price, and a premium for the company’s unaffiliated shareholders. 

The case is Twitter v. Musk, 22-0613, Delaware Chancery Court (Wilmington).

—With assistance from Matthew Bultman and Giles Turner.

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