Twitter summons Musk banks in the fight for takeover

Twitter has sent dozens of subpoenas in recent days to banks and investors who have been backing Elon Musk in his bid to take over the company, while also seeking more information about well-known technology industry figures considered close to Mr.

The subpoenas are part of an effort to help determine whether Musk quietly abandoned his deal to acquire Twitter even before he told her of his plans to do so, which would breach his contract with the company, two people familiar with Twitter’s thinking said, who asked Anonymity because the discussions were private.

Under the terms of the deal, Mr. Musk must make “the best reasonable effort” to close the sale, including securing debt financing for the $44 billion purchase. But Twitter alleges in a lawsuit against Mr. Musk in Delaware Chancery Court that it appears to have abandoned its efforts to complete its funding, breaking the agreement.

Mr. Musk, one of the world’s richest men, has signed letters of commitment with a number of Wall Street banks, led by Morgan Stanley, for a total of $13 billion in debt financing. He later brought on Silicon Valley investors, including venture capital firm Andreessen Horowitz, to provide nearly $7 billion in funding.

In subpoenas sent to investment banks working for Musk, including Morgan Stanley, Barclays and Bank of America, Twitter demanded information regarding his efforts to complete debt financing, including an expected timeline for doing so. Twitter is also requesting information about Mr. Musk’s decision to cancel his loan against his Tesla stock to help fund the deal.

Mr. Musk had originally planned to take out a loan of approximately $12 billion against his Tesla stock. But the electric-car maker’s shares plummeted in the weeks since he signed the deal, making such a loan considerably riskier.

Twitter also requested more information about any analysis the banks conducted on Musk’s instructions about the number of fake users on its platform. He cited his concerns about fake accounts on Twitter as a reason for wanting to withdraw his offer.

What Musk’s bankers asked for — and why — could be crucial to the deal. Twitter’s ability to sue Mr. Musk to force him to close the deal, under the “specific performance clause,” is rescinded if its debt financing collapses. But this escape works only if the banks, which have signed letters of commitment, withdraw independently — not if Mr. Musk urges them.

“Delaware courts themselves are very cautious about people who have their fingerprints basically on self-sabotage,” said Eric Talley, professor of corporate law at Columbia Business School.

Representatives for Morgan Stanley and Barclays declined to comment. A Bank of America spokesperson did not respond to a request for comment.

Mr. Musk provided a response to Twitter’s lawsuit on Friday, although it was temporarily sealed to the public while he and Twitter negotiate the parts to be revised. His arguments justifying his decision to walk away from the Twitter deal have thus far focused on the company’s public disclosures about bots and fake accounts.

His attorneys noted that these disclosures were materially misleading, which could give Mr. Musk reasons to back out of the deal. (Twitter’s lawyers asked what exactly is misleading.)

The legal contact on Twitter over the past week has also sought more information about conversations with a number of Silicon Valley heavyweights with whom Mr. Musk is known to be close. This information could shed more light on the evolution of his thinking about the deal, once he started sending out tweets suggesting he might want to back out or take another cut on it at a lower price.

In a subpoena issued to Valor Equity Partners, the investment firm founded by Antonio Gracias, a longtime friend of Musk, Twitter’s lawyers sought more information about conversations with Chamath Palihapitiya, CEO of Social Capital, and David Sachs, general partner. at investment firm Craft Ventures, among others. Both Mr. Palihapitiya and Mr. Sacks were at a private conference in which Mr. Musk expressed doubts about Twitter’s disclosures regarding the number of its fake accounts.

The Washington Post previously reported that Twitter was seeking more information about Mr Musk’s acquaintances.

A Palihapitiya spokesman declined to comment. A spokeswoman for Mr. Sachs did not respond to a request for comment.

Twitter also asked Valor to provide any information regarding Bob Swan, the former Intel CEO who played a key role in putting the deal together. Twitter claimed that Mr. Musk fired Mr. Swan, saying the two men were “not on the same wavelength”, and later replaced him with Mr. Gracias. But according to Twitter’s lawsuit, Mr. Gracias “never appeared” to take over the funding effort “led by Mr. Swan.”

Mr. Gracias did not respond to a request for comment.

Kate Conger Contribute to the preparation of reports.

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