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Friday, December 2, 2022

Elon Musk’s request to postpone his trial with Twitter was granted by the judge

This week’s unexpected return of Elon Musk to the negotiating table with Twitter may have been simply the first volley in the next round of the lengthy battle for the company’s destiny.

Mr. Musk was able to delay Twitter’s lawsuit against him on Thursday. He urged a court to postpone a trial that was scheduled to begin in a little over a week, which might compel him to honour a $44 billion contract he made in April to purchase the firm.

The judge handling the case, Kathaleen McCormick, accepted Mr. Musk’s request, enabling the billionaire three weeks to finalise his acquisition of Twitter.

The postponement of the trial is the most recent upheaval in what has become the most turbulent and closely watched corporate battle in years, pitting the colossal personality and wealth of Mr. Musk against Twitter, a company that has always struggled with management turmoil and profitability despite its high profile.

The decision provides Mr. Musk with further time to settle his funding, which may have gotten more challenging since his first offer due to inflation and a sluggish economy. In a court filing, Mr. Musk said that the procedure would take several weeks and that he may complete it by October 28. The court said that if the sale does not complete by then, a trial would be set for November.

Twitter had opposed the motion, stating that Mr. Musk did not seem to be serious about securing finance and that the trial should continue until he makes good on his most recent offer of $54.20 per share immediately.

Mr. Musk requested a pause while board members of Twitter evaluated his offer and discussions dragged on for a third day.

Mr. Musk’s attorneys accused Twitter of dragging out the process by urging that the case continue, while Twitter said that the effort to stop the action was “an invitation to greater mischief and delay.”

On October 17, Twitter was scheduled to confront Mr. Musk in court. But on Monday, he handed a letter to Twitter announcing he would pay $44 billion for the firm, as he had committed to do in April before changing his mind and announcing he would abandon the purchase.

Mr. Musk’s new proposal forced Twitter’s board to juggle two high-stakes negotiations: one over the legal fight, and the other over a possible settlement that would sidestep the courtroom drama.

Twitter intends to continue litigating until a definitive settlement is reached, according to two individuals familiar with the secret conversations. The board’s transaction committee, composed of technology leaders Bret Taylor, Martha Lane Fox, and Patrick Pichette, has met regularly with legal and financial advisors to oversee the deal-making process.

Normally, the parties would simply exchange the required legal paperwork in order to finalise this transaction. The unpredictable nature of Mr. Musk’s financial operations, though, has made Twitter unwilling to withdraw its case until he acquires control and delivers his assets to Twitter shareholders, according to sources.

In a court filing, Twitter’s attorneys said that Mr. Musk had declined to commit to a closing date. However, his attorneys contended that maintaining the litigation would undermine the agreement and that the banks who had committed to finance Mr. Musk’s bid for Twitter were willing to uphold their obligations.

Twitter said in a court filing that a corporate representative for one of the banks testified on Thursday that Mr. Musk had not informed the bank of his intention to finalise the deal. The complaint did not name the banking representative or disclose where the person testified. Twitter has charged Mr. Musk in its lawsuit with breach of contract for failing to make reasonable attempts to arrange the loan funding.

Mr. Musk’s own fortune and equity investors will provide the remaining $44 billion for the transaction. Mr. Musk, the CEO of Tesla, has sold around $15.5 billion in Tesla shares to gather the funds necessary to acquire Twitter.

In the spring, he announced that he had secured $7.1 billion from equity investors, such as the top venture capital companies Andreessen Horowitz and Sequoia Capital, as well as his personal confidants, such as the computer billionaire Larry Ellison.

It is unclear if the terms of their contract permit them to withdraw in light of the new circumstances. Oracle, the firm led by Mr. Ellison, and Andreessen Horowitz representatives did not reply to demands for comment.

A spokesperson for Binance, the cryptocurrency exchange that pledged $500 million, said that the company’s participation intentions had not altered.

Twitter’s lawsuit, which may proceed in November if no settlement is reached, continues to cast a shadow over the negotiations. In the event of a trial, the Delaware Court of Chancery, which specialises in resolving business issues, might hear evidence from Mr. Musk and Twitter’s senior executives.

As discussions persisted, Mr. Musk’s planned deposition on Thursday was cancelled, according to two individuals familiar with the situation. It has been rescheduled for Monday, according to a source with knowledge of the arrangements, although Mr. Musk’s on-the-record interview has already been postponed twice and may be rescheduled again due to the postponement of the trial.

Jonathan James
I serve as a Senior Executive Journalist of The National Era
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