Twitter queries banks on Musk's attempts to undermine $44 bln deal

Taskus

03/08/2022 24:36

By Tom Hals
    WILMINGTON, Del., Aug 2 (Reuters) - Twitter Inc  TWTR.N  is
attempting to find evidence that Elon Musk tried to torpedo the
financing of his $44 billion takeover deal for the social media
company while also looking into his motivation for backing out
of the deal, legal experts said.
    Twitter sent dozens of civil subpoenas this week to global
banks such as units of Morgan Stanley  MS.N , co-investors in
the deal including an affiliate of Brookfield Asset Management
Inc  BAMa.TO , and Musk advisers, according to filings over the
past two days in the Delaware Court of Chancery.
    Morgan Stanley declined to comment. Brookfield did not
immediately respond to a request for comment. Representatives
for Musk and Twitter could not be reached.
    The subpoenas seek documents and communications concerning
the deal, its financing, any information on "bot," or fake,
Twitter accounts. They also seek information that the recipients
may have about potential impact on the deal from changes in the
stock price of electric car maker Tesla Inc  TSLA.O , of which
Musk is chief executive.
    The subpoenas are part of Twitter's lawsuit against Musk
seeking to hold him to the deal at the $54.20 per share price he
had agreed to. A five-day trial is scheduled to begin Oct. 17 in
the Delaware Chancery Court.
    Experts said the subpoenas indicate Twitter wants to know
what lenders, investors and advisers were saying to each other
about Musk's behavior after he signed the deal in late April.
    "They suspect that behind the scenes he's been conspiring to
blow the whole thing up," said Minor Myers, a professor at UConn
School of Law. 
    Musk said on July 8 he was backing out of the deal because
Twitter allegedly breached the agreement by withholding data
about fake accounts on the platform. Twitter has said the fake
accounts are a distraction from the only issue that matters,
which is the terms of the agreement. Musk had also said he was
walking away because Twitter fired high-ranking executives and
one-third of the talent acquisition team, breaching Twitter's
obligation to "preserve substantially intact the material
components of its current business organization." urn:newsml:reuters.com:*:nL4N2YP3CN
    Musk cannot be ordered to close the deal if financing fails
-- provided he's not the cause of the failed funding, according
to legal experts.  
    Twitter's subpoenas focused on what they said was the firing
of Bob Swan, an operating partner at venture capital firm
Andreessen Horowitz, who initially led Musk's efforts to
finalize deal finance. He was replaced by Antonio Gracias, a
long-time Musk associate, according to Twitter's lawsuit.
    Brian Quinn, a professor at Boston College Law School, said
Twitter seems to want to know if "Gracias had any role in
getting financing done or if he was just supposed to slow things
down."
    Swan did not immediately respond to messages sent via
LinkedIn and to Andreeesen Horowitz. Gracias did not respond to
a request for comment sent to his Valor Equity Partners firm.
    Experts said Twitter will be interested in understanding
lenders' concerns about the number of fake accounts on the
platform, and whether it was an issue for them as Musk has
suggested.
    Investors were asked for communications about the Twitter
deal with those close to Musk, such as Steve Jurvetson, a former
Tesla board member and current director of SpaceX, the private
rocket company founded and led by Musk.
    Jurvetson did not immediately respond to a request for
comment sent to his Future Ventures firm.
    "lol, lawyers w/ TWTR are sending subpoenas to friends in
the ecosystem around @elonmusk," wrote Joe Lonsdale, a
co-founder of Palantir Technologies Inc  PLTR.N , on Twitter. "I
have nothing to do with this aside from a few snarky comments,
but got a 'YOU ARE HEREBY COMMANDED' document notice," he wrote.
    He called Twitter's subpoenas a "giant harassing fishing
expedition."
    Lonsdale did not immediately respond to a request for
comment sent to his 8VC firm.
    Theodore Kittila, a Delaware corporate litigator, said
Twitter is trying to determine what Musk was saying privately
while publicly sending tweets that he was concerned about bots
and fake accounts on Twitter.
    "They are trying to climb in there, behind the tweets," said
Kittila. "They are looking at emails and trying to divine the
conversation that actually occurred and what drove his decision
to suspend the deal."
    Musk has sent his own subpoenas over the past two days to
Concentrix Solutions Corp  CNXC.O , a data analytics firm, and
TaskUs USA  TASK.O , which moderates content. Musk's subpoena
questions were filed under seal.

 (Reporting by Tom Hals in Wilmington, Delaware; Editing by
Leslie Adler)
 ((thomas.hals@thomsonreuters.com; +1 610 544 2712; Reuters
Messaging: thomas.hals.thomsonreuters.com@reuters.net))