The Tesla CEO is seeking to free himself from the $44 billion Twitter purchase agreement, which he tried to cancel.
Elon Musk has accused Twitter of fraud in a counterclaim for thwarting a $44 billion deal for the social media company, which he claimed withheld necessary information and misled his team about the true size of its user base.
The counter-suit filed by the billionaire and Tesla CEO alleges that Twitter committed fraud, breach of contract and violation of securities law in Texas, where Musk lives.
Musk’s counterclaims were filed in secret last week and settled in a lawsuit late Thursday in Delaware Chancery Court.
Musk offered to buy Twitter earlier this year, then tried to back off the deal by claiming that the social platform was riddled with more “spamware” and fake accounts than Twitter exposed.
Twitter sued to force it to complete the acquisition. Musk responded by filing a counterclaim.
Musk’s lawyers argue in the counter-suit that Twitter’s “misrepresentations or omissions” distorted the value of the company and caused Musk in April to agree to buy it at an inflated price. They said that Twitter’s disclosures revealed it had 65 million fewer “monetable daily active users”, whose digital ads can be viewed, compared to the 238 million users Twitter claims.
The filing also said that most Twitter ads appear only to a segment of the company’s user base.
Musk’s team also accused Twitter of making several major changes in recent months without consulting Musk, including decisions about personnel matters and allegedly violating social media restrictions imposed by the government of India, which is Twitter’s third largest market. Musk has vowed to make Twitter a haven for free speech, but also said it must comply with the local laws in which it operates.
Twitter described Musk’s reasoning as “a story imagined in an attempt to escape a merger agreement that Musk no longer appeals to.” The company, in particular, disputed Musk’s assessment of fake accounts, saying the analysis was based on a “public web tool” that identified Musk’s Twitter account as a potential bot.
“The result is a distortion that Musk hopes will nonetheless make waves,” the Twitter response said.
The case is due to go to court on October 17. The legal battle intensifies as preparations begin for the five-day trial in a Delaware court, which specializes in the battles of the complex, high-stakes business world.
This fight flows from Musk wooing Twitter’s board of directors with an offer of $54.20 per share in April, but then in July, he announced he was terminating their agreement because the company had misled him about counting fake accounts and spam.
Twitter, whose shares rose about 3.5 percent to $42.51 Friday, stuck to its estimate that less than 5 percent of activity on the platform is due to “bots” rather than people.
The social media platform urged shareholders to approve the deal, setting a vote on the merger on September 13.
While asking questions at Tesla’s annual shareholder meeting on Thursday, Musk was asked if his potential ownership of Twitter might distract attention from his management of the electric car company.
“I think Tesla, you know, will continue to do very well even if I get kidnapped by extraterrestrials, or I go back to my home planet,” he joked. “To be honest, I don’t have an easy answer,” Musk added. He assured shareholders that, for now, he has no plans to leave his lead role at Tesla.