The judge overseeing the acquisition dispute between Elon Musk and Twitter on Thursday ruled to pause the legal proceedings until Oct. 28 following a request from the Tesla CEO, meaning the trial that was set to begin Oct. 17 will not go ahead as planned.
Twitter had opposed Musk’s motion to stay the proceedings and raised concerns that he might not follow through on his word to quickly close the deal.
“If the transaction does not close by 5 p.m. on October 28, 2022, the parties are instructed to contact me by email that evening to obtain November 2022 trial dates,” the judge, Delaware Chancery Court chancellor Kathaleen St. Judge McCormick, said in the order.
Lawyers for Elon Musk on Thursday filed a motion to stay the legal proceedings in its dispute with Twitter and to remove from the court’s calendar the trial that had been set to begin Oct. 17, noting “changed circumstances that have effectively mooted this action,” according to a Thursday court filing.
The filing — which says the stay is “pending the closing of the transaction” — comes after Musk earlier this week proposed proceeding with the $44 billion acquisition of Twitter at the originally agreed upon terms after having spent months trying to get out of the deal.
The filing states that Musk is “willing to close the transaction at $54.20, the Debt Financing parties are working cooperatively to fund the close, and closing is expected on or around October 28.”
But the filing also alludes to resistance from Twitter to halt the legal proceedings. “Twitter will not take yes for an answer. Astonishingly, they have insisted on proceeding with this litigation,” according to the letter.
Lawyers for Twitter issued a sharp response to Musk’s filing. “The obstacle to terminating this litigation is not, as Defendants say, that Twitter is unwilling to take yes for an answer,” the letter states. “The obstacle is that Defendants still refuse to accept their contractual obligations.”
It notes that for months, Musk has been attempting to exit the deal and “now, on the eve of trial, Defendants declare they intend to close after all. ‘Trust us,’ they say, ‘we mean it this time.’”
“Until Defendants commit to close as required, Twitter is entitled to its day in Court,” Twitter’s letter states. “Defendants can and should close next week. Until they do, this action is not moot and should be brought to trial.”
The back-and-forth offers the clearest indication yet that Musk’s financing may now be the central issue in the dispute between the Tesla CEO and Twitter over halting the legal proceedings and completing the deal. Musk has previously said he would pay for the acquisition through a mix of debt commitments from financial institutions, equity financing from investors and his own assets.
But legal experts have raised concerns that debt financiers may now want to pull out of the deal in light of recent changes to the debt market and declines in value of social media companies. Twitter, according to experts, would likely want to maintain the litigation as pressure on Musk unless he agrees to close the deal with or without the debt financing.
In the Thursday filing, Musk’s legal team stated that Twitter has resisted a stay based on concerns that Musk has made his offer to close the deal contingent on the receipt of the debt financing, and that payment could fall through. “Counsel for the debt financing parties has advised that each of their clients is prepared to honor its obligations,” Musk’s filing states.
The filing asks the court to stay the proceedings and order Twitter to complete the deal.
“Proceeding toward trial is not only an enormous waste of party and judicial resources, it will undermine the ability of the parties to close the transaction,” the filing states. “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.”
In its response letter, Twitter’s lawyers state that Musk’s team has refused “to commit to any closing date.” It added that a representative for one of the banks set to lend to Musk testified Thursday morning that “Mr. Musk has yet to send them a borrowing notice and has not otherwise communicated to them that he intends to close the transaction, let alone on any particular timeline.”
Twitter’s lawyers added: ‘Defendants should be arranging to close on Monday, October 10.”
Earlier Thursday, lawyers for Musk and Twitter agreed to postpone the Tesla CEO’s deposition in the court fight, a source familiar with the negotiations told CNN. Musk’s deposition had been set to begin Thursday, per a notice filed earlier this week. It’s not clear whether a new date has been set for Musk’s deposition, but Twitter could end up pushing to complete it early next week if a deal is not reached.
As of Wednesday, the two sides had yet to reach a deal to close the acquisition, a separate source told CNN. Delaware Chancery Court chancellor Kathaleen St. Jude McCormick, the judge who is overseeing the litigation, said in a Wednesday court filing that neither side had filed to stay the proceedings and she was continuing to prepare for trial to begin on Oct. 17.
On Thursday, McCormick filed a letter to both sides laying out deadlines for responding to discovery motions, noting that the “trial is fast approaching.”