Twitter questions banks over Musk’s efforts to undermine $44 billion deal

Elon Musk’s Twitter profile is seen on a smartphone placed over printed Twitter logos in this picture taken April 28, 2022. REUTERS/Dado Ruvic/Illustration

WILMINGTON, Del., Aug 2 (Reuters) – Twitter Inc ( TWTR.N ) is trying 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 incentives for support outside the deal, legal experts said.

Twitter sent dozens of subpoenas this week to global banks including units of Morgan Stanley ( MS.N ), co-investors in the deal including an affiliate of Brookfield Asset Management Inc ( BAMA.TO ) and advisers to Musk, according to filings over the past two days in the Delaware Court of First Instance.

Morgan Stanley declined to comment. Brookfield did not immediately respond to a request for comment. Representatives for Musk and Twitter could not be reached for comment.

The subpoenas seek documents and communications related to the deal, its financing, any information about “bots” or fake Twitter accounts. They are also looking for information the recipients might have about the potential impact on the deal from changes in the share 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 that seeks to keep him in the deal at the $54.20 per share price he agreed to. A five-day trial is scheduled to begin Oct. 17 in Delaware District Court.

Experts said the subpoenas show Twitter wants to know what lenders, investors and advisers were saying to each other about Musk’s behavior after the deal was signed in late April.

“They suspect he was conspiring behind the scenes to blow the whole thing up,” said Minor Myers, a professor at UConn Law School.

Musk said on July 8 that he was pulling out of the deal because Twitter allegedly violated the agreement by withholding data about fake accounts on the platform. Twitter said the fake accounts distract from the only issue that matters, which is the terms of the deal. Musk had also said he left because Twitter laid off senior executives and a third of its talent acquisition team, in violation of Twitter’s obligation to “maintain substantially intact the material elements of its current business organization.” read more

Musk cannot be ordered to close the deal if funding fails — provided he is not the cause of the funding failure himself, according to legal experts.

The Twitter subpoenas centered 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 the deal’s financing. He was replaced by Antonio Gracias, a longtime Musk associate, according to Twitter’s lawsuit.

Brian Quinn, a professor at Boston College Law School, said Twitter seemed to want to know if “Grecias had a role in the funding or if he just had to slow things down.”

Swan did not immediately respond to messages sent via LinkedIn to Andreeesen Horowitz. Gracias did not respond to a request for comment sent to Valor Equity Partners.

Experts said Twitter would be interested in understanding lenders’ concerns about the number of fake accounts on the platform and whether it was a problem for them, as Musk suggested.

Investors were asked to communicate the deal on Twitter with people close to Musk, including 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 company Future Ventures.

“Lol lawyers with TWTR are sending subpoenas to friends in the ecosystem around @elonmusk,” Joe Lonsdale, co-founder of Palantir Technologies Inc ( PLTR.N ), wrote on Twitter. “I have nothing to do with this other than a few snarky comments, but I received a document notification ‘YOU ARE COMMANDED,'” he wrote.

He called the Twitter calls a “giant harassing fishing expedition.”

Lonsdale did not immediately respond to a request for comment sent to his company 8VC.

Theodore Kittila, a Delaware corporate judge, said Twitter is trying to determine what Musk was saying privately while tweeting publicly that he was concerned about bots and fake Twitter accounts.

“They’re trying to climb in there, behind the tweets,” Kittila said. “They are examining the emails and trying to uncover the conversation that actually happened and what led to his decision to suspend the deal.”

Musk sent his own calls over the past two days to Concentrix Solutions Corp ( CNXC.O ), a data analytics company, and TaskUs USA ( TASK.O ), which moderates content. Musk’s subpoena questions were filed under seal.

Report by Tom Hals in Wilmington, Delaware. Editor: Leslie Adler

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