Elon Musk and Twitter Inc may reach an agreement to end their litigation as soon as Wednesday and clear the way for the world’s richest person to close his $44 billion deal for the social media platform, a source familiar with the litigation told Reuters.
Chancellor Kathaleen McCormick, the judge on Delaware’s Court of Chancery, wrote: “The parties have not filed a stipulation to stay this action, nor has any party moved for a stay. I, therefore, continue to press on toward our trial set to begin on Oct. 17.”
Musk, who is also the Chief Executive Officer of electric car maker Tesla Inc, proposed to Twitter late on Monday he would change course and abide by his April agreement to buy the company for $54.20 per share if Twitter dropped its litigation against him.
Musk’s proposal on Monday included a condition that the deal closing was pending the receipt of the necessary debt financing. The potential agreement would likely remove that condition, said the source, who requested anonymity as the discussions are confidential.
Twitter’s legal team and lawyers for Musk updated the judge on Tuesday with their attempts to try to overcome mutual distrust and find a process for closing the deal.
An attorney representing a proposed class action against Musk on behalf of Twitter shareholders wrote to McCormick to say Musk should be required to make a “substantial deposit” in case he again reneges on his commitment to close. Musk should also be liable for interest for delays in closing the deal, said the letter from attorney Michael Hanrahan.
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Musk is scheduled to be deposed on Thursday in Austin, Texas, which provided Twitter leverage in talks to close the deal.
Musk cancelled a deposition in late September, citing concerns about a Twitter attorney’s possible exposure to someone who later tested positive for COVID-19, according to a court filing made public on Wednesday.
Shares of Twitter were down 1.3 per cent at $51.35 late on Wednesday afternoon. The stock on Tuesday hit its highest level since Musk and Twitter agreed in April that he would buy the company for $54.20 per share.
Musk said in July he was walking away from the takeover agreement because he discovered Twitter had allegedly misled him about the number of fake accounts, among other claims.
Part of Musk’s case was based on allegations by Twitter whistleblower Peiter “Mudge” Zatko that became public in August.
Twitter’s legal team has wanted to investigate if Quinn Emanuel’s lawyer Alex Spiro, who has led the case for Musk, communicated with the whistleblower as early as May. The law firm has said in court filings its attorneys did not communicate with Zatko or his representatives.
Spiro did not immediately respond to a request for comment.
Twitter uncovered an anonymous May 6 email to Spiro from “a former Exec at Twitter leading teams directly involving Trust & Safety/Content Moderation,” according to court documents. The sender offered to communicate “via alternate means.”
Zatko, who was head of Twitter security until he was fired in January, has said under oath he did not communicate with Musk or Musk’s attorneys at Quinn Emanuel.
McCormick, the Delaware Court of Chancery judge, said in a Monday ruling it is “at least plausible” that Zatko sent the anonymous email. She ordered Spiro to file by 4:30 p.m. EDT on Wednesday a statement with the court explaining his actions regarding the May 6 email.