Judge Sets October 28th Deadline For Musk To Close Twitter Buyout On Original Terms After Halting Trial

Just when it looked like the Twitter/Elon Musk drama was coming to some sort of an ending, with Musk reportedly agreeing to his original $54.20 per share bid, rapidly changing details behind the scenes suggest that anything could still be possible. But for now, the Twitter vs. Musk trial has been halted under the assumption that both parties are ready, willing and able to consummate the deal on its original terms. Whether or not that will happens remains the key question…

Twitter shares were volatile in trading in premarket trading after an endless stream of headlines hit the terminal in the afternoon, casting uncertainty on the deal and its related financing once again. Late in the day, the litigation was officially stayed by the court and a deadline was issued for Musk to consummate the buyout on his original proposed terms. 

First, early on Thursday, in a filing with Delaware’s Court of Chancery, Musk requested that Twitter drop its litigation against him so he could secure financing and consummate the deal on its original terms by October 28, CNBC reported. 

The filing seemed to suggest that Twitter was creating roadblocks to consummate the deal on its original terms: “Twitter will not take yes for an answer. Astonishingly, they have insisted on proceeding with this litigation, recklessly putting the deal at risk and gambling with their stockholders’ interests.”

Musk’s attorney’s continued – making it very clear to us that the Tesla CEO doesn’t seem the least bit interested in being deposed or continuing with discovery: “Instead of allowing the parties to turn their focus to securing the Debt Financing necessary to consummate the transaction and preparing for a transition of the business, the parties will instead remain distracted by completing discovery and an unnecessary trial.”

“As a result, there is no need for an expedited trial to order defendants to do what they are already doing, and this action is now moot,” the filing said. 

 “By far the most likely possibility is that the debt is funded in which case the deal will close on or around October 28,” Musk’s attorney’s wrote. They also said that “counsel for the debt financing parties has advised that each of their clients is prepared to honor its obligations under the Bank Debt Commitment Letter on the terms and subject to satisfaction of the conditions set forth therein.”

Musk’s lawyer, Alex Spiro, also said on Thursday that “he refused to take Twitter Inc.’s proposal to buy the social media platform at a lower price because of ‘certain self-serving conditions’ that Twitter wanted to put on the deal,” Bloomberg reported. However, no details on those conditions were given. 

“Any statement to the contrary is a lie,” Spiro said. Twitter said earlier this week that “The intention of the Company is to close the transaction at $54.20 per share”. However, it has yet to pull out of its litigation against Musk. 

Musk also introduced the idea on Thursday that the deal could be held up by financing falling through, saying Twitter wanted to hold off on the proceedings because of the “theoretical possibility of a future failure to obtain the debt financing.” This is something we suggested days ago could be part of Musk’s strategy. 

sigh: “Musk said Twitter was resisting halting court proceedings based on the “theoretical possibility of a future failure to obtain the debt financing.” – BBG https://t.co/jnArdqErEh

— zerohedge (@zerohedge) October 6, 2022

“In the event a closing does not occur, the litigation can promptly resume based on the then existing facts and whatever issues remain at the time,” Musk’s lawyers wrote. 

Twitter filed with the court later in the day, saying it doubts Musk’s intentions and asking the court to not stay the trial, arguing that Musk should be ready to close on the deal regardless of the litigation’s status. “Until Defendants commit to close as required, Twitter is entitled to its day in Court,” they said.

Late in the day, the judge in charge of the case, Delaware Chancery Judge Kathaleen St. J. McCormick, granted Musk’s request to stay the trial but offered the condition that the transaction needs to be done by 5PM on October 28. If it doesn’t happen by then, she will set a new trial date for a trial that Musk would very likely lose swiftly given that he has now had two opportunities to consummate the buyout – one of those officially on the record before the court. 

And, as Yale JD and former trial attorney Montana Skeptic pointed out on Twitter Thursday night, the financing likely remains a huge risk for Musk. He can’t sell Tesla stock until the company’s earnings come out on October 22.

8/ I believe Musk runs an enormous (ENORMOUS) risk if the $13B in financing falls through. There is ample evidence to conclude that his own shenanigans & delays caused it. Chancellor McCormick won’t hesitate to so conclude.

— Montana Skeptic (@montana_skeptic) October 6, 2022

Skeptic continued: “So, why allow any delay at all? First, if the case goes to trial, it makes any appeal that much more bullet-proof. Musk can’t argue he would have gotten there but for being denied the stay. Second, it will conserve judicial resources if the deal now closes. Third, and most importantly, I am guessing the Chancellor knows Musk needs to sell stock to fund his obligations, and that until after Tesla reports earnings (Oct 22), Musk can’t start selling.”

“Musk would be deeply foolish not to close this deal. Per the agreement. With no more monkey business. Even if he doesn’t realize that, I can assure you that Skadden & Quinn Emanuel do.”

Meanwhile, Musk spent Thursday night Tweeting as though he had plans for Twitter’s future. “There will be very rapid product evolution,” he said. “Software engineering, server operations & design will rule the roost.”

He also “coincidentally” announced that production of the Tesla Semi was on its way – and that deliveries would be made to Pepsi on December 1. 

Fascinating timing on this announcement.

I wonder if he may need to sell some Tesla stock in order to raise money for something… https://t.co/AIyE3kqTpr

— Nate Anderson (@ClarityToast) October 7, 2022

We’ll believe it when we see it…