EFiled: Jul 12 2022 04:11PM EDT

Transaction ID 67812653
Case No. 2022-0613-
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

TWITTER, INC.,

Plaintiff,

v.
C.A. No. _____________
ELON R. MUSK, X HOLDINGS I, INC.,
and X HOLDINGS II, INC.,

Defendants.

VERIFIED COMPLAINT

Plaintiff Twitter, Inc. (“Twitter”), by and through its undersigned counsel, as

and for its complaint against defendants Elon R. Musk, X Holdings I, Inc.

(“Parent”), and X Holdings II, Inc. (“Acquisition Sub”), alleges as follows:

NATURE OF THE ACTION

1. In April 2022, Elon Musk entered into a binding merger agreement

with Twitter, promising to use his best efforts to get the deal done. Now, less than

three months later, Musk refuses to honor his obligations to Twitter and its

stockholders because the deal he signed no longer serves his personal interests.

Having mounted a public spectacle to put Twitter in play, and having proposed and

then signed a seller-friendly merger agreement, Musk apparently believes that he

— unlike every other party subject to Delaware contract law — is free to change

his mind, trash the company, disrupt its operations, destroy stockholder value, and
walk away. This repudiation follows a long list of material contractual breaches by

Musk that have cast a pall over Twitter and its business. Twitter brings this action

to enjoin Musk from further breaches, to compel Musk to fulfill his legal

obligations, and to compel consummation of the merger upon satisfaction of the

few outstanding conditions.

2. Musk, the Chief Executive Officer of Tesla, Inc. and leader of SpaceX

and other entities, opened a Twitter account in 2009. His presence on the Twitter

platform is ubiquitous. With over 100 million followers, Musk’s account is one of

the most followed on Twitter, and he has Tweeted more than 18,000 times. He has

also suggested he would consider starting his own company to compete with

Twitter.

3. On April 25, 2022, Musk, acting through and with his solely-owned

entities, Parent and Acquisition Sub, agreed to buy Twitter for $54.20 per share in

cash, for a total of about $44 billion.

4. That price, presented by Musk on a take-it-or-leave-it basis in an

unsolicited public offer, represented a 38% premium over Twitter’s unaffected

share price. The other terms Musk offered and agreed to were, as he touted, “seller

friendly.” There is no financing contingency and no diligence condition. The deal

is backed by airtight debt and equity commitments. Musk has personally

committed $33.5 billion.

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 5. After the merger agreement was signed, the market fell. As the Wall

Street Journal reported recently, the value of Musk’s stake in Tesla, the anchor of

his personal wealth, has declined by more than $100 billion from its November

2021 peak.

6. So Musk wants out. Rather than bear the cost of the market

downturn, as the merger agreement requires, Musk wants to shift it to Twitter’s

stockholders. This is in keeping with the tactics Musk has deployed against

Twitter and its stockholders since earlier this year, when he started amassing an

undisclosed stake in the company and continued to grow his position without

required notification. It tracks the disdain he has shown for the company that one

would have expected Musk, as its would-be steward, to protect. Since signing the

merger agreement, Musk has repeatedly disparaged Twitter and the deal, creating

business risk for Twitter and downward pressure on its share price.

7. Musk’s exit strategy is a model of hypocrisy. One of the chief reasons

Musk cited on March 31, 2022 for wanting to buy Twitter was to rid it of the

“[c]rypto spam” he viewed as a “major blight on the user experience.” Musk said

he needed to take the company private because, according to him, purging spam

would otherwise be commercially impractical. In his press release announcing the

deal on April 25, 2022, Musk raised a clarion call to “defeat[] the spam bots.”

But when the market declined and the fixed-price deal became less attractive,

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Musk shifted his narrative, suddenly demanding “verification” that spam was not a

serious problem on Twitter’s platform, and claiming a burning need to conduct

“diligence” he had expressly forsworn.

8. Musk’s strategy is also a model of bad faith. While pretending to

exercise the narrow right he has under the merger agreement to information for

“consummation of the transaction,” Musk has been working furiously — albeit

fruitlessly — to try to show that the company he promised to buy and not disparage

has made material misrepresentations about its business to regulators and investors.

He has also asserted, falsely, that consummation of the merger depends on the

results of his fishing expedition and his ability to secure debt financing.

9. On July 8, 2022, a little over a month after first using bad-faith pursuit

of spam-related evidence to assert a baseless claim of breach, Musk gave Twitter

notice purporting to terminate the merger agreement. The notice alleges three

grounds for termination: (i) purported breach of information-sharing and

cooperation covenants; (ii) supposed “materially inaccurate representations” in the

merger agreement that allegedly are “reasonably likely to result in” a Company

Material Adverse Effect; and (iii) purported failure to comply with the ordinary

course covenant by terminating certain employees, slowing hiring, and failing to

retain key personnel.

10. These claims are pretexts and lack any merit. Twitter has abided by

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its covenants, and no Company Material Adverse Effect has occurred or is

reasonably likely to occur. Musk, by contrast, has been acting against this deal

since the market started turning, and has breached the merger agreement repeatedly

in the process. He has purported to put the deal on “hold” pending satisfaction of

imaginary conditions, breached his financing efforts obligations in the process,

violated his obligations to treat requests for consent reasonably and to provide

information about financing status, violated his non-disparagement obligation,

misused confidential information, and otherwise failed to employ required efforts

to consummate the acquisition.

11. Twitter is entitled to specific performance of defendants’ obligations

under the merger agreement and to secure for Twitter stockholders the benefit of

Musk’s bargain. Musk and his entities should be enjoined from further breaches,

ordered to comply with their obligations to work toward satisfying the few closing

conditions, and ordered to close upon satisfaction of those conditions.

THE PARTIES

12. Plaintiff Twitter, Inc. is a Delaware corporation headquartered in

San Francisco, California that owns and operates a global platform for real-time

self-expression and conversation.

13. Defendant Elon R. Musk is a sophisticated entrepreneur who owns

approximately 9.6% of Twitter’s stock. He is the CEO of Tesla and leads SpaceX,

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among other entities he founded or co-founded. Musk is referred to in the merger

agreement as Equity Investor, and is the President, Secretary, Treasurer, and sole

shareholder of both Parent and Acquisition Sub. Musk signed the merger

agreement on behalf of both Parent and Acquisition Sub, and agreed to be a party

to the agreement in his individual capacity as Equity Investor with respect to

several “Specified Provisions.” Ex. 1, Preamble.

14. Defendant X Holdings I, Inc., or Parent, is a Delaware corporation

formed on April 19, 2022 solely for the purpose of engaging in, and arranging

financing for, the transactions contemplated by the merger agreement.

15. Defendant X Holdings II, Inc., or Acquisition Sub, is a Delaware

corporation and a wholly owned subsidiary of Parent. Acquisition Sub was formed

on April 19, 2022 solely for the purpose of engaging in, and arranging financing

for, the transactions contemplated by the merger agreement.

JURISDICTION

16. This Court has subject matter jurisdiction under 10 Del. C. § 341,

8 Del. C. § 111(a), and 6 Del. C. § 2708.

17. Personal jurisdiction over Parent and Acquisition Sub is proper

because both are incorporated under the laws of Delaware and consented to

jurisdiction by agreeing to “expressly and irrevocably submit[] to the exclusive

personal jurisdiction of the Delaware Court of Chancery . . . in the event any

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dispute arises out of [the merger agreement] or the transactions contemplated by

[the merger agreement].” Ex. 1 § 9.10(a).

18. Personal jurisdiction over Musk is proper pursuant to 10 Del. C.

§ 3104(c)(1) because, among other things, (a) Musk formed Parent and Acquisition

Sub, both Delaware corporations wholly owned by Musk, for the sole purpose of

acquiring Twitter, a Delaware corporation; and (b) Musk agreed to undertake

“reasonable best efforts” to consummate the contemplated transaction, including

by causing Parent and Acquisition Sub to deliver a Certificate of Merger to the

Delaware Secretary of State. Id. §§ 2.3(a), 6.3(a).

FACTUAL ALLEGATIONS

I. Musk sets his sights on Twitter

19. Musk is active on Twitter’s platform and has expressed a keen interest

in the use and inherent potential of the platform. Starting in January 2022, Musk

began purchasing Twitter stock. By March 14, 2022, he had secretly accumulated

a substantial position — about 5% of the company’s outstanding shares. SEC

regulations required that he disclose that position no later than March 24, 2022.

Musk failed to disclose, and instead kept amassing Twitter stock with the market

none the wiser. By April 1, 2022, Musk had accumulated about 9.1% of the

company’s outstanding shares, still in secret. Not until April 4, 2022 did Musk

finally disclose his holdings, which made him Twitter’s largest stockholder.

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Twitter’s stock price jumped 27% upon the disclosure. Between March 24 and

April 4, over 112 million Twitter shares traded in ignorance of Musk’s mounting

ownership.

20. Meanwhile, on March 26, 2022, Musk spoke with two Twitter

directors, Jack Dorsey and Egon Durban, about the future of social media and the

prospect of Musk’s joining the Twitter board. Soon after, Musk told Twitter CEO

Parag Agrawal and Twitter board chair Bret Taylor that he had in mind three

options relative to Twitter: join its board, take the company private, or start a

competitor.

21. Musk would repeat this statement over the coming days. His

contemplation of building a rival platform to Twitter was not a secret. On March

26, 2022, he had Tweeted that he was giving “serious thought” to the idea.

22. In early April, after further discussion among Musk, Agrawal, Taylor,

and Twitter director Martha Lane Fox, chair of Twitter’s nominating and corporate

governance committee, the Twitter board evaluated Musk’s candidacy as a

director. Having considered, among other things, Musk’s interest in the platform,

his technical expertise, and the perspectives he could bring, the board offered

Musk the position on April 3. Musk accepted, the parties signed a letter

agreement, and the agreement was announced on April 5.

23. Not a week later, Musk abruptly changed tack. On April 9, the day

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his appointment to the board was to become effective, Musk told Twitter he would

not join the board. Instead, he would offer to buy the company.

II. Musk offers to buy Twitter

24. On April 13 — four days after reversing course on the board seat —

Musk texted Taylor that he planned to make an offer to acquire all of Twitter. His

unsolicited offer, conveyed by letter later that day, was accompanied by a threat:

I am offering to buy 100% of Twitter for $54.20 per

share in cash, a 54% premium over the day before I
began investing in Twitter and a 38% premium over the
day before my investment was publicly announced. My
offer is my best and final offer and if it is not accepted, I
would need to reconsider my position as a shareholder.

25. The following day, on April 14, Musk announced his offer publicly

and noted that it was conditioned on customary business due diligence and

financing. At a public event the same day, Musk — whose enormous personal

wealth exceeds the capital of most public companies — boasted that he could

“technically afford” to purchase Twitter outright.

26. Also on April 14, the Twitter board met to discuss Musk’s proposal.

It established a transactions committee composed of independent directors Taylor,

Lane Fox, and Patrick Pichette to evaluate the proposal, oversee negotiations, and

explore strategic alternatives. The board was assisted in its review by Goldman

Sachs and J.P. Morgan as financial advisors, and Simpson Thacher as independent

counsel.

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 27. Faced with Musk’s rapid accumulation of Twitter stock and take-it-or-

leave-it offer, and concerned that he might launch a hostile tender offer without

notice, the board adopted a customary shareholder rights plan to protect its

stockholders from “coercive or otherwise unfair takeover tactics.” The board took

this action to reduce the likelihood of a takeover without payment of an appropriate

control premium and to ensure that the board had sufficient time to make an

informed judgment on Musk’s or any other offer. Under the rights plan’s terms, a

single investor or group’s acquisition of more than 15% of the company’s

outstanding common stock without board approval gives other stockholders the

opportunity to acquire additional stock at a considerable discount. The plan was

adopted and announced on April 15, 2022.

28. The board’s concerns proved well-grounded. Musk began making all-

too-obvious public references to a hostile tender offer:

29. At the same time, Musk worked to strengthen the offer he had made

and might make by tender. By April 20, he had personally committed $21 billion

in equity financing and lined up $25.5 billion of committed debt financing, with

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$12.5 billion of that secured by his Tesla stock.

30. Having obtained these commitments, Musk announced in an April 21,

2022 securities filing that his offer was no longer conditioned on financing or

subject to due diligence:

At the time of delivery, the Proposal was also subject to

the completion of financing and business due diligence,
but it is no longer subject to financing as a result of the
Reporting Person’s receipt of the financing commitments
. . . and is no longer subject to business due diligence.

Musk proclaimed himself prepared to begin negotiations “immediately,” and

confirmed he was “exploring whether to commence a tender offer.”

31. On Saturday, April 23, 2022, Musk asked to speak with Twitter

representatives about his offer. At the direction of the transactions committee,

Taylor engaged with Musk, who reiterated that his offer was “best and final” and

threatened once again to take it to Twitter’s stockholders directly if the board did

not engage immediately.

32. The following day, on Sunday, April 24, 2022, Musk tried again to

force Twitter’s hand. He delivered a letter to the board repeating that his $54.20

per share offer was “best and final,” threatening once more to sell all of his shares

if his bid were rejected, and saying he would propose a “seller friendly” merger

agreement to be signed before the market opened the next day. Musk’s counsel

sent over a draft agreement, reiterated that Musk’s offer was not contingent on any

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due diligence, and underscored that the form of the proposed agreement was

“intended to make this easy on all to get to a deal asap.”

33. The agreement was negotiated through the night and, in the process,

became even more seller-friendly. Among the provisions not contained in Musk’s

proposal but included at Twitter’s insistence were an undertaking by defendants,

including Musk, to “take or cause to be taken . . . all actions and to do, or cause to

be done, all things necessary, proper or advisable” to obtain the financing (already

committed) to consummate the transaction, Ex. 1 § 6.10(a); a clear disclaimer of

any financing condition to closing, id. § 6.10(f); and a right on Twitter’s part to

request and promptly receive updates from Musk about his progress in obtaining

financing, id. § 6.10(d). These provisions ensured that financing would be no

obstacle to closing and that the company would have the right to stay informed of

Musk’s progress in arranging his financing.

34. Twitter also negotiated for itself a right to hire and fire employees at

all levels, including executives, without having to seek Musk’s consent.

Musk’s initial draft of the merger agreement would have deemed the hiring and

firing of an employee at the level of vice president or above a presumptive

violation of the ordinary course covenant absent Musk’s consent. Twitter

successfully struck that provision before signing.

35. Twitter further negotiated to narrow the circumstances under which

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defendants could escape the deal by claiming a “Company Material Adverse

Effect.” In addition to excluding, for example, market-wide and industry-wide

effects and circumstances and declines in stock price and financial performance,

the final definition excluded matters relating to or resulting from Musk’s identity

or communications, “performance” of the agreement, and any matter disclosed by

Twitter in its SEC filings other than the “Risk Factors” and “Forward-Looking

Statements” sections of those disclosures. Id. Art. I.

36. Finally, and critically, Twitter negotiated for itself a robust right to

demand specific performance of the agreement’s terms that encompassed the right

to compel defendants to close the deal, and ensured that Musk personally was

bound by that provision (among others). Id. § 9.9(a)-(b), Preamble.

37. At a board meeting on April 25, 2022, Goldman Sachs and

J.P. Morgan each presented their fairness opinions, and the board discussed the

agreement. The board ultimately approved the merger agreement and decided to

recommend stockholder approval, both because the price was fair to stockholders

and because the merger agreement promised a high level of closing certainty.

Twitter had taken Musk’s claimed “seller friendly” draft agreement and secured

other key concessions to make it even more so. Not only were there no financing

or diligence conditions, but Musk had already secured debt commitments that

together with his personal equity commitment would suffice to fund the purchase.

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 38. Twitter had been buffeted by Musk’s reversals before. For the benefit

of stockholders and employees, the board needed assurance that this agreement

would stick. It received that assurance in the terms it was able to negotiate.

III. The final, agreed-upon deal terms

39. The terms of the transaction are governed by the merger agreement

executed on April 25, 2022.

40. Under the agreement, at closing, Acquisition Sub will merge into

Twitter, and Twitter will continue as a private corporation owned by Musk through

his wholly owned shell companies. Twitter stockholders will receive $54.20 per

share in cash, and the company’s common stock will be delisted from the New

York Stock Exchange.

A. Closing Conditions

41. The conditions to closing are few. The transaction is subject to a

majority vote of Twitter’s stockholders and to specified regulatory approvals.

Id. § 7.1. The deal is also conditioned on the non-occurrence of a Company

Material Adverse Effect that is continuing at the time of closing. Id. § 7.2(c).

The agreement contains various representations by Twitter, including that its SEC

filings since January 1, 2022, at the time filed or at the time amended or

supplemented, are complete and accurate in all material respects, fairly depict the

financial condition of the company in all material respects, and were prepared in

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accordance with GAAP. Id. § 4.6. Any inaccuracy in these representations does

not excuse closing unless it rises to the level of a Company Material Adverse

Effect. Id. § 7.2(b).

42. Company Material Adverse Effect is defined as:

any change, event, effect or circumstance which,

individually or in the aggregate, has resulted in or would
reasonably be expected to result in a material adverse
effect on the business, financial condition or results of
operations of the Company and its Subsidiaries, taken as
a whole . . . .

Id. Art. I. As one would expect with a “seller friendly” merger agreement, the

contract identifies numerous changes, events, and circumstances expressly

excluded from the determination of whether a Company Material Adverse Effect

has occurred:

[C]hanges, events, effects or circumstances which,

directly or indirectly, to the extent they relate to or result
from the following shall be excluded from, and not taken
into account in, the determination of Company Material
Adverse Effect:

(i) any condition, change, effect or circumstance

generally affecting any of the industries or markets in
which the Company or its Subsidiaries operate;

...

(iii) general economic, regulatory or political conditions

(or changes therein) or conditions (or changes therein) in
the financial, credit or securities markets (including
changes in interest or currency exchange rates) in the
United States or any other country or region in the world;

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 ...

(iv) the negotiation, execution, announcement,

performance, consummation or existence of this
Agreement or the transactions contemplated by this
Agreement, including (A) by reason of the identity of
Elon Musk, Parent or any of their Affiliates or their
respective financing sources, or any communication by
Parent or any of its Affiliates or their respective financing
sources, including regarding their plans or intentions with
respect to the conduct of the business of the Company or
any of its Subsidiaries and (B) any litigation, claim or
legal proceeding threatened or initiated against Parent,
Acquisition Sub, the Company or any of their respective
Affiliates, officers or directors, in each case, arising out
of or relating to the this Agreement or the transactions
contemplated by this Agreement, and including the
impact of any of the foregoing on any relationships with
customers, suppliers, vendors, collaboration partners,
employees, unions or regulators;

...

(viii) any changes in the market price or trading volume

of the Company Common Stock, any failure by the
Company or its Subsidiaries to meet internal, analysts’ or
other earnings estimates or financial projections or
forecasts for any period, any changes in credit ratings and
any changes in analysts’ recommendations or ratings
with respect to the Company or any of its Subsidiaries
(provided that the facts or occurrences giving rise to or
contributing to such changes or failure that are not
otherwise excluded from the definition of “Company
Material Adverse Effect” may be taken into account in
determining whether there has been a Company Material
Adverse Effect); and

(ix) any matter disclosed in the Company SEC

Documents filed by the Company prior to the date of this
Agreement (other than any disclosures set forth under the

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 headings “Risk Factors” or “Forward-Looking
Statements”).

Id.

43. The parties thus agreed that any circumstance affecting the market

generally or other social media companies would not excuse defendants from

closing. Nor would any circumstance arising from the existence or performance of

the agreement, or from any communication by Musk, “including the impact of any

of the foregoing” on any of Twitter’s relationships with, among others, customers.

Likewise, matters that Twitter disclosed in sections of its SEC filings other than

the “Risk Factors” and “Forward-Looking Statements” sections cannot constitute a

Company Material Adverse Effect. And Twitter’s failure to meet financial

projections will not excuse closing unless that failure results from an occurrence

independently qualifying as a Company Material Adverse Effect (taking into

account all of the express exclusions).

44. The agreement also makes clear that financing is not a condition to

closing:

Notwithstanding anything contained in this Agreement to

the contrary, the Equity Investor, Parent and Acquisition
Sub each acknowledge and affirm that it is not a
condition to the Closing or to any of its obligations under
this Agreement that the Equity Investor, Parent,
Acquisition Sub and/or any of their respective Affiliates
obtain any financing (including the Debt Financing) for
any of the transactions contemplated by this Agreement.

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Id. § 5.4; see also id. § 6.10(f).

45. Nor is there any diligence condition. Indeed, each of Parent and

Acquisition Sub represents that it “conducted, to its satisfaction, its own

independent investigation, review and analysis of the business, results of

operations, prospects, condition (financial or otherwise) or assets of the Company

and its Subsidiaries,” and that, in determining to proceed with the merger, each

“relied solely on the results of its own independent review and analysis and the

covenants, representations and warranties of the Company” in the merger

agreement. Id. § 5.11. Parent and Acquisition Sub further acknowledge that

“neither the Company nor any of its Subsidiaries, nor any other Person, makes or

has made or is making any express or implied representation or warranty with

respect to the Company or any of its Subsidiaries or their respective business or

operations, in each case, other than those expressly given solely by the Company in

Article IV,” and they represent that in agreeing to the merger they were not relying

on “any express or implied representation or warranty, or the accuracy or the

completeness of the representations and warranties” in the merger agreement about

Twitter and its business and its operations “other than those expressly given solely

by the Company in Article IV.” Id.

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 B. Efforts Covenants

46. The agreement requires all parties, including Musk, to use their

“reasonable best efforts” to consummate the merger and cause all of the closing

conditions to be satisfied. Id. § 6.3(a).

47. Defendants, including Musk, have a “hell-or-high-water” obligation to

close on their financing commitments for the transaction. They must:

take, or cause to be taken, all actions and . . . do, or cause

to be done, all things necessary, proper or advisable to
arrange, obtain and consummate the Financing at or prior
to the Closing on the terms and subject to the conditions
set forth in the Financing Commitments (including any
“flex” provisions). . . .

Id. § 6.10(a). More specifically, Musk and Parent have an unconditional obligation

to “take (or cause to be taken) all actions, and do (or cause to be done) all things

necessary, proper or advisable to obtain the Equity Financing,” which includes,

among other things, Musk’s funding of his personal equity commitment at or

before closing. Id. § 6.10(e).

C. Information Sharing

48. The merger agreement requires the parties to share certain information

with one another in the run-up to closing.

49. Defendants, including Musk, are required to keep Twitter “reasonably

informed on a current basis of the status of [their] efforts to arrange and finalize the

Financing” and to “promptly provide and respond to any updates reasonably

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requested by the Company with respect to the status” of those efforts.

Id. § 6.10(d)(iv)-(v). For its part, Twitter is required to use its “commercially

reasonable best efforts” to assist defendants with arranging financing, but that

obligation is qualified: Twitter need not “prepare or provide any financial

statements or other financial information” other than the financial information

provided to the SEC, nor provide any “other information that is not available to the

Company without undue effort or expense.” Id. § 6.11(a). Moreover, Twitter’s

obligations under Section 6.11 are its “sole obligation . . . with respect to

cooperation in connection with the arrangement of any financing,” and Twitter

may be considered to have breached the provision only if a failure by Parent to

obtain the committed debt financing is “due solely to a deliberate action or

omission taken or omitted to be taken by the Company in material breach of its

obligations.” Id.

50. Subject to certain conditions, including entry into a confidentiality

agreement, Twitter must provide Parent and its advisors with “reasonable access”

to information about its “business, properties and personnel” as defendants

“reasonably” request. Id. § 6.4. The information requested must be for a

“reasonable business purpose related to the consummation of the transactions

contemplated by this Agreement.” Id. (emphasis added). In addition, Twitter can

decline a request if in its “reasonable judgment” it determines that compliance

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would “cause significant competitive harm to the Company or its Subsidiaries if

the transactions contemplated by this Agreement are not consummated” or would

“violate applicable Law,” including privacy laws. Id. Parent cannot use the

information obtained “for any competitive or other purpose unrelated to the

consummation of the transactions contemplated by th[e] Agreement.” Id. And

Parent must use its “reasonable best efforts to minimize any disruption to” Twitter

“that may result from requests for access.” Id.

D. Ordinary Course Covenant

51. The agreement contains a seller-friendly ordinary course covenant,

requiring Twitter to use no more than “its commercially reasonable efforts” to

“conduct the business of the Company and its Subsidiaries in the ordinary course

of business” unless, among other things, an action outside the ordinary course is

“agreed to in writing by Parent (which consent shall not be unreasonably withheld,

delayed or conditioned).” Id. § 6.1. There is no requirement of compliance with

“past practice.” And, as noted, before the agreement was signed, Twitter

succeeded in striking from the covenant a requirement to obtain Parent’s consent

for the hiring and firing of employees.

E. Public Statements and Non-Disparagement

52. Section 6.8 of the agreement contains standard language requiring

each side to consult with the other before issuing certain public statements, as well

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as negotiated language concerning Musk’s ability to Tweet about the merger.

Under the provision, Musk may so Tweet only “so long as such Tweets do not

disparage the Company or any of its Representatives.” Id. § 6.8.

F. Termination

53. Defendants’ ability to terminate the agreement before the presumptive

drop-dead date of October 24, 2022 is extremely limited and carefully

circumscribed. While there are closing conditions related to the accuracy of

Twitter’s representations and warranties and to Twitter’s compliance with its

covenants, there is no right for defendants to terminate unless there is a breach

sufficiently significant to cause failure of a closing condition, which, after due

notice, is either incapable of being cured or is not cured within 30 days after such

notice. Id. § 8.1(d). Defendants have no right to terminate, moreover, if any of

them are in material breach of their own obligations under the agreement. Id.

G. Specific Performance

54. Twitter may seek specific performance, an injunction, or other

equitable relief to enforce any of defendants’ obligations under the merger

agreement. Id. § 9.9(a). It has the specific power to compel Musk to fund the

equity financing and close the merger, provided the closing conditions are met (or

are capable of being met at the time of closing), the debt financing (which is

already committed) has been or will be funded at the closing, and the company is

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itself prepared to close. Id. § 9.9(b).

IV. The financing structure

55. At the time of signing, the financing for the transaction had three

components: loans to the post-closing Twitter, a personal loan on margin to Musk

(against his Tesla stock), and an equity commitment from Musk himself.

56. The loans to Twitter, of up to $13 billion in the aggregate, are

promised by Morgan Stanley Senior Funding, Inc. and other lenders in a debt

commitment letter dated April 25, 2022. The committed financing comprises a

$6.5 billion term loan, a $500 million revolving credit facility, and $6 billion of

bridge financing. Although the debt commitment letter requires Musk to assist the

lenders in marketing the debt, his failure to do so does not release the lenders from

their obligation to fund and the financing is not conditioned on the lenders’ ability

to market the debt. The lenders’ obligation is subject only to the closing of the

merger itself and certain other conditions the satisfaction of which lies in

defendants’ control.

57. The margin loan of $12.5 billion to Musk personally was promised by

Morgan Stanley Senior Funding, Inc. and other lenders in a margin loan

commitment letter also dated April 25, 2022. The loan was to be secured by $62.5

billion worth of Musk’s Tesla stock — about 62 million shares at the time of

signing.

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 58. Under an equity commitment letter dated April 20, 2022, Musk also

personally agreed to contribute to or otherwise provide to Parent $21 billion of

equity capital to be used to fund the purchase price. Because much of his net

worth is tied up in Tesla shares, Musk would need to sell — indeed, has already

sold — millions of those shares to fund his equity commitment.

59. The structure of Musk’s financing meant that the merger could

become significantly more expensive for him if Tesla’s stock price were to decline

(and significantly less expensive if Tesla’s stock price were to rise). For the equity

component, the lower Tesla’s stock price was, the more shares of Tesla Musk

would need to sell to provide the cash he committed. For the margin loans, a

substantial decline in Tesla’s stock price would require Musk to pledge more

shares or cash as collateral to the financing sources.

V. The market turns

60. The risk of market decline, which was Musk’s alone to bear under the

merger agreement, materialized. Soon after signing, the U.S. capital markets took

a turn for the worse. Within a week after April 25, 2022, the date the merger

agreement was executed, Musk elected to sell 9.8 million Tesla shares to finance

the merger at prices as low as $822.68 per share, substantially below their pre-

Twitter-signing price of $1,005 per share. He then promptly Tweeted, “No further

TSLA sales planned after today.” But the Tesla stock price kept dropping, putting

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Musk at risk of needing to pledge yet more Tesla shares to consummate his

proposed margin loan and to sell still more to fund his equity commitment.

61. On May 4, 2022, Parent and Musk, faced with needing to pledge more

Tesla shares to satisfy the condition that the margin loan not exceed 20% of the

value of the pledged stock, decreased the amount of that loan. On May 24, without

notifying Twitter, they dispensed with the loan entirely and agreed in a new equity

commitment letter to increase Musk’s equity commitment to $33.5 billion. That

letter, which remains operative, gives Twitter third-party beneficiary rights to

enforce directly against Musk his equity commitment in accordance with its terms

and the terms of the merger agreement.

62. Musk remains personally responsible for $33.5 billion of the

approximately $44 billion required to complete the transaction.

VI. Musk grasps for an out

63. Musk wanted an escape. But the merger agreement left him little

room. With no financing contingency or diligence condition, the agreement gave

Musk no out absent a Company Material Adverse Effect or a material covenant

breach by Twitter. Musk had to try to conjure one of those.

A. False or spam accounts

64. What Musk alighted upon first was a representation in Twitter’s

quarterly SEC filings over many consecutive years that based on its internal

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processes the company estimated “the average of false or spam accounts” on its

platform “represented fewer than 5% of our mDAU during the quarter.”

“Monetizable Daily Active Usage or Users,” or mDAU, is a non-GAAP metric

Twitter employs to measure the number of people or organizations that use the

Twitter platform. In its filings, Twitter defines mDAU as “people, organizations or

other accounts who logged in or were otherwise authenticated and accessed Twitter

on any given day through twitter.com, Twitter applications that are able to show

ads, or paid Twitter products, including subscriptions.”

65. In addition to deploying automated and manual processes that suspend

on average more than a million suspicious accounts each day, the company

undertakes a rigorous, daily process using human reviewers to estimate spam or

false accounts remaining on its platform after automated filtering and manual

review.

66. Twitter’s SEC disclosures regarding that process and its findings are

heavily qualified. As described in the “Note Regarding Key Metrics” section of its

filings, Twitter’s “calculation of mDAU is not based on any standardized industry

methodology,” “may differ from estimates published by third parties or from

similarly-titled metrics of our competitors,” and “may not accurately reflect the

actual number of people or organizations using our platform.” As for the estimate

of spam or false accounts as a percentage of mDAU, Twitter explains that it is

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based on “an internal review of a sample of accounts,” involves “significant

judgment,” “may not accurately represent the actual number of [false or spam]

accounts,” and could be too low. Twitter has published the same qualified estimate

— that fewer than 5% of mDAU are spam or false — for the last three years, and

published similar estimates for five years preceding that.

67. Musk was well aware when he signed the merger agreement that spam

accounted for some portion of Twitter’s mDAU, and well aware of Twitter’s

qualified disclosures. Spam was one of the main reasons Musk cited, publicly and

privately, for wanting to buy the company. On April 9, 2022, the day Musk said

he wanted to buy Twitter rather than join its board, he texted Taylor that “purging

fake users” from the platform had to be done in the context of a private company

because he believed it would “make the numbers look terrible.” At a public event

on April 14, Musk said eliminating spam bots would be a “top priority” for him in

running Twitter. On April 21, days before the deal was inked, he declared:

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Musk echoed that same sentiment in the press release announcing the merger on

April 25, stating that upon acquiring Twitter he would prioritize “defeating the

spam bots, and authenticating all humans.”

68. Yet Musk made his offer without seeking any representation from

Twitter regarding its estimates of spam or false accounts. He even sweetened his

offer to the Twitter board by expressly withdrawing his prior diligence condition.

69. On May 5, 2022, Musk announced that he had raised an additional

$7.1 billion of equity commitments for the deal from 19 investors — including

$1 billion from Oracle chairman Larry Ellison, $800 million from Sequoia Capital,

$400 million from Andreessen Horowitz, and $375 million from a subsidiary of the

Qatari sovereign wealth fund. Musk’s investors, all sophisticated market

participants, made these commitments in the face of Musk’s public statements

regarding spam accounts, and knowing he had forsworn diligence. Musk made his

plans to address spam a key part of his pitch: As Andreessen Horowitz’s co-CEO

stated in publicly announcing the investment, the firm thought Musk was “perhaps

the only person in the world” who could “fix” Twitter’s alleged “difficult issue[]”

with “bots.”

70. Then, however, as the market (and Tesla’s stock price) declined,

Musk’s advisors began to demand detailed information about Twitter’s methods of

calculating mDAU and estimating the prevalence of false or spam accounts.

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 71. Twitter had entered into a confidentiality agreement with Musk to

share non-public information in preparation for post-closing transition, and

convened an in-person meeting with Musk and his team on May 6, 2022. Among

the topics of discussion were mDAU and spam-related subjects. In advance of the

meeting, Musk’s bankers circulated an agenda with items related to users on the

Twitter platform, including: “How do you estimate that fewer than 5% of mDAU

are false or spam accounts?” Twitter’s representatives addressed that question at

the meeting, summarizing the company’s process.

72. Following up on or about May 9, Musk’s bankers at Morgan Stanley

added entries to their diligence tracker requesting user-related information,

including a request for “User database containing key metrics including, but not

limited to, number of users, number of verified users, number of monthly active

users, number of handles, etc.” Neither Musk nor his advisors said what had

prompted these requests or identified new information regarding spam or false

accounts that had come to light warranting the inquiries. Nothing had changed

about Twitter’s estimates concerning the prevalence of spam on the platform in the

days since signing. Nonetheless, in the spirit of cooperation, Twitter responded on

May 12 with data sets and written descriptions of its audience metrics and its

process for sampling the prevalence of false or spam accounts.

73. Early on May 13, 2022, in advance of a diligence meeting that had

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been scheduled to discuss the data Twitter had provided, Musk Tweeted without

any advance notice to the company that the “Twitter deal [is] temporarily on hold”

until the company showed him proof for its estimate that less than 5% of Twitter

accounts are spam or false:

The Reuters story Musk linked to in his Tweet was a report on Twitter’s 10-Q

filing made on May 2, 2022, and contained the same heavily qualified 5% estimate

Twitter had been disclosing in its SEC filings for the past three years. Musk had

no basis for asserting that the deal was “on hold” based on this longstanding

disclosure. Twitter’s deal counsel called Musk’s deal counsel. Two hours after the

“on hold” Tweet was published, Musk belatedly Tweeted that he was still

“committed” to the deal.

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 74. Cognizant of its own obligations under the merger agreement, Twitter

proceeded with the May 13 diligence meeting, which lasted for about two hours.

During this session, Twitter explained, among other things, that its spam

estimation process entails daily sampling for a total set of approximately 9,000

accounts per quarter that are manually reviewed.

75. Later that day, Musk Tweeted publicly a misrepresentation that

Twitter’s sample size for spam estimates was just 100.

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 76. The next day, he boasted publicly that he had violated his non-

disclosure obligations:

77. Musk’s Tweets on May 13 and 14 violated his obligations under the

merger agreement, including the provisions prohibiting public comments not

consented to by Twitter, disparagement, misuse of information provided under

Section 6.4, requiring best efforts to consummate the merger.

78. On May 16, Agrawal Tweeted that Twitter’s 5% estimate is based on

“multiple human reviews (in replicate) for thousands of accounts, that are sampled

at random, consistently over time, from *accounts we count as mDAUs*.”

He explained that the company’s human review process “uses both public and

private data (eg, IP address, phone number, geolocation, client/browser signatures,

what the account does when it’s active…) to make a determination on each

account” — something Twitter also explains in its SEC filings. Agrawal stood by

Twitter’s estimate, and noted that the company is constantly updating its systems

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and rules to remove as much spam as possible:

79. Musk responded with another disparaging Tweet:

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 80. As the market continued to fall, Musk persisted in his public and

misleading attacks on Twitter’s handling and disclosure of spam or false accounts.

In another Tweet on May 15, 2022 and a statement at a technology conference on

May 16, Musk made the baseless claim that fake users might account for as much

as 90% of Twitter’s users. Asked whether the “Twitter deal [is] going to get

closed,” Musk responded that “it really depends on a lot of factors” and posited

that Twitter’s estimate that spam or false accounts comprised fewer than 5% of

mDAU might be “a material adverse misstatement” if “in fact it is four or five

times that number, or perhaps ten times that number.”

81. On May 17, 2022, Musk Tweeted, without basis or explanation, that

“20% fake/spam accounts, while 4 times what Twitter claims, could be *much*

higher,” adding that “[t]his deal cannot move forward” pending further analysis of

Twitter’s spam estimates. In yet another breach of his non-disparagement

obligation and efforts covenants, Musk encouraged the SEC to investigate the

accuracy of Twitter’s disclosures:

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 B. Defendants’ lawyer letters

82. Even as Musk was violating his own contractual obligations, Twitter

continued to respond cooperatively to his representatives’ increasingly

unreasonable inquiries. Between May 16 and May 20, the company provided

detailed written responses to several information requests.

83. On May 20, 2022, Musk’s team sent a request for Twitter’s “firehose”

data — which is essentially a live-feed of data concerning activity (Tweeting,

Retweeting, and “liking” Tweets, for example) associated with the public accounts

on Twitter’s platform. Again, no explanation was offered for how this request

furthered a “reasonable business purpose related to the consummation of the

transactions contemplated by” the merger agreement, as required by Section 6.4.

Nor can the firehose data even be used to accurately estimate the prevalence of

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spam or false accounts. As Agrawal had explained in his May 16 Tweets, that

estimate depends in part on private data not available in the firehose. Conversely,

the firehose includes Tweets that Twitter’s systems and processes catch and do not

count within mDAU for that day.

84. On May 21, 2022, Twitter hosted a third diligence session with

Musk’s team and yet again discussed Twitter’s processes for calculating mDAU

and estimates of spam or false accounts. Twitter also provided a detailed summary

document describing the process the company uses to estimate spam as a

percentage of mDAU.

85. Defendants responded with increasingly invasive and unreasonable

requests. And rather than use “reasonable best efforts to minimize any disruption

to the respective business of the Company and its Subsidiaries that may result from

requests for access,” Ex. 1 § 6.4, defendants repeatedly demanded immediate

responses to their access requests. The scope of the requests and the deadlines

defendants imposed on their satisfaction were unreasonable, disruptive to the

business, and far outside the bounds of Section 6.4.

86. Twitter nonetheless continued to work with Musk to try to respond to

the requests. It extended an ongoing offer to engage with Musk and his

representatives regarding its calculation of mDAU, and held several more diligence

sessions through the end of May. It also provided detailed written responses,

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including custom reporting, to his escalating requests for information.

87. On May 25, 2022, defendants’ counsel sent the first of a series of

aggressive letters copying their litigation counsel at Quinn Emmanuel. This one

falsely asserted that Twitter had “failed to respond to any” of defendants’

information requests and insisted that defendants be granted access to the firehose

data so Musk could “make an independent assessment of the prevalence of fake or

spam accounts on Twitter’s platform.” Though the letter called Twitter’s own

spam detection methodologies “lax,” it identified no basis for that charge.

88. Nor, again, did defendants explain how fulfillment of the firehose data

demand would further consummation of the merger or what basis they had to

demand the right to “make an independent assessment” of the prevalence of false

or spam accounts on the platform. Even assuming that was a proper purpose,

reviewing the full firehose data would not result in an accurate assessment or

mimic the rigorous process that Twitter employs by sampling accounts and using

public and private data to manually determine whether an account constitutes spam

— as Twitter’s representatives had already repeatedly explained to Musk’s team.

89. On May 27, 2022, Twitter responded by noting its weeks-long active

engagement with Musk’s team and explaining that some of defendants’ requests

sought disclosure of highly sensitive information and data that would be difficult to

furnish and would expose Twitter to competitive harm if shared. After all, Musk

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had said he would do one of three things with Twitter: sit on its board, buy it, or

build a competitor. He had already accepted and then rejected the first option, and

was plotting a pretextual escape from the second. Musk’s third option — building

a competitor to Twitter — remained. Still, Twitter again responded constructively

and reiterated its commitment to work with Musk’s team to provide reasonable

access to requested information.

90. On May 31, 2022, defendants lobbed another missive, again falsely

asserting that Twitter had “refused” to provide requested data and that the

company’s spam or false account detection methods were “inadequate.” The letter

claimed Musk was willing to implement protocols to protect against “damage or

competitive harm to the company.”

91. On June 1, 2022, Twitter responded by refuting that it had “refused”

provision of data, demonstrating that, to the contrary, it had been working with

Musk’s team to honor their requests within the bounds of the contract. To help set

the protocols Musk had said he was willing to honor, Twitter asked a series of

questions directed at how the data would be used and by whom, and how it would

be protected.

92. Defendants’ response on June 6, 2022 made no effort to answer those

questions or identify data-protection protocols; instead, it accused Twitter of

breach and advanced a false narrative that Twitter had been stonewalling Musk’s

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requests. Musk publicly filed the letter, which repeated his baseless and damaging

charge that Twitter had “lax” detection methods. He included none of Twitter’s

correspondence in that filing and omitted all details about the information Twitter

had provided. He thus continued to present the public with a misleadingly

incomplete narrative about his communications with Twitter, with equally

misleading implications about the likelihood that the merger would be completed

and about Twitter’s operations.

93. Steadfast in its commitment to consummate the merger, Twitter

continued to try to get Musk’s team what it demanded while safeguarding its

customers’ data and harboring very real concerns about how Musk might use the

data if he succeeded in escaping the deal. On or about June 9, 2022, Musk’s

counsel indicated that granting access to 30 days’ worth of historical firehose data

would satisfy Musk’s request for the firehose data. So, on June 15, the company

gave Musk’s team secure access to that raw data — about 49 tebibytes’ worth. It

did so even though the merger agreement did not require the sharing of this

information.

94. Musk’s next lawyer letter, dated June 17, 2022, skimmed over this

massive data production. Like the earlier correspondence, the June 17 letter

described an alternative reality in which Twitter had failed to cooperate in

supplying Musk with information, entirely contrary to the facts, apparently in the

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belief that repeating a falsehood enough can make it true. The letter also continued

to move the goal posts by adding a new request for “the sample set” and

“calculations” Twitter used to estimate that fewer than 5% of its mDAUs are false

or spam accounts over the past eight quarters. Thus, with no basis, defendants

sought to audit information Twitter consistently had caveated as an “estimate”

requiring “significant judgment” to prepare.

95. The June 17 letter further contained a litigation-style discovery

demand for information Musk asserted was needed to investigate “the truthfulness

of Twitter’s representations to date regarding its active user base, and the veracity

of its methodologies for determining that user base.” It broadly demanded board

materials relating to mDAU and spam, as well as emails, text messages, and other

communications about those topics — highly unusual requests in the context of

good faith efforts toward completion of any merger transaction, and absurd in the

context of this one, which has no diligence condition. Musk propounded these

unreasonable requests and touted his contrived narrative about Twitter’s

methodologies, all without ever identifying a basis for questioning the veracity of

Twitter’s methodologies or the accuracy of its SEC disclosures.

96. On June 20, 2022, Twitter set the record straight in a detailed response

letter. It noted that the two sides had been working collaboratively to clear

regulatory hurdles and “address voluminous data requests” from defendants, that

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Twitter had “dedicated significant resources” to providing defendants with the data

requested, and that Twitter had already provided a wealth of data sweeping far

beyond the bounds of what might conceivably be deemed reasonably necessary to

consummate the transaction. Twitter noted that Musk, while continuing to accuse

Twitter of misrepresenting its spam or false account estimate, had offered not a

single fact to support the accusation. And Twitter observed that defendants’

“increasingly irrelevant, unsupportable, and voluminous information requests”

appeared directed not at consummating the merger but rather the opposite: trying

to avoid the merger.

97. Nonetheless, in a continuing effort at cooperation, Twitter agreed to

provide Musk everything he now demanded regarding the firehose, including

access to “100% of Tweets and favoriting activity.” Twitter cautioned, as it had so

many times before, that this data would not allow Musk to accurately assess the

number of spam or false accounts. But on June 21, 2022, it gave defendants’

counsel the demanded access.

98. Meanwhile, Agrawal and Twitter CFO Ned Segal had been trying to

set up a meeting with Musk to discuss the company’s process in estimating the

prevalence of spam or false accounts. On June 17, 2022, Segal proposed a

discussion with Musk and his team to “cover spam as a % of DAU.” Musk

responded that he had a conflict at the proposed time. When Agrawal sought to

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reengage on the matter, Musk agreed to a time on June 21, but then bowed out and

asked Agrawal and Segal to speak with his team not about the spam estimation

process but “the pro forma financials for the debt.”

99. On June 29, 2022, Musk complained through counsel that Twitter

purportedly had “placed an artificial cap on the number of searches” Musk’s

experts could run on the firehose data, and had failed to respond to certain of the

new requests made on June 17. (False again, as explained below.) The June 29

letter notably did not take issue with Twitter’s refusal to provide responses to the

discovery-like requests for emails, text messages, and other communications in the

June 17 letter. But it contained a slew of new demands — several asking Twitter

to create more custom reporting.

100. On July 1, 2022, Twitter pointed out just how far beyond the scope of

Section 6.4 defendants’ requests had strayed. Nonetheless, Twitter noted that it

was providing yet more information in response to recent requests and would

continue to devote the “time and considerable resources” necessary to respond to

outstanding requests. Twitter also explained that it had placed “no artificial

throttling of rate limits.” In follow-up correspondence, it became clear that the

“limit” Musk had bumped up against was not the result of throttling but a default

100,000-per-month limit on the number of queries that could be conducted. With

his undisclosed team of data reviewers working behind the scenes, Musk had hit

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that limit within about two weeks. Twitter immediately agreed to, and did, raise

the monthly search query limit one hundred-fold, to 10 million — more than 100

times what most paying Twitter customers would get.

101. From the outset of this extraordinary post-signing information

exchange process, Musk accused Twitter of “lax” methodologies for calculating

spam or false accounts. Knowing that his actions risked harm to Twitter and its

stockholders, wreaked havoc on the trading price of Twitter’s stock, and could

have serious consequences for the deal, Musk leveled serious charges, both

publicly and through lawyer letters, that Twitter had misled its investors and

customers. But Musk exhibited little interest in understanding Twitter’s process

for estimating spam accounts that went into the company’s disclosures. Indeed, in

a June 30 conversation with Segal, Musk acknowledged he had not read the

detailed summary of Twitter’s sampling process provided back in May. Once

again, Segal offered to spend time with Musk and review the detailed summary of

Twitter’s sampling process as the Twitter team had done with Musk’s advisors.

That meeting never occurred despite multiple attempts by Twitter.

102. From the outset, defendants’ information requests were designed to

try to tank the deal. Musk’s increasingly outlandish requests reflect not a genuine

examination of Twitter’s processes but a litigation-driven campaign to try to create

a record of non-cooperation on Twitter’s part. When Twitter nonetheless bent over

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backwards to address the increasingly burdensome requests, Musk resorted to false

assertions that it had not.

C. Financial information

103. In seeking to manufacture a record of covenant breach, Musk seized

not just on Section 6.4 but also on Section 6.11, which obligates Twitter to

reasonably cooperate with Parent to facilitate arrangement of debt financing.

104. Throughout the post-signing period, Twitter’s advisors had been

working with Musk’s representatives to furnish them relevant financial information

about the company. These discussions had been productive under the supervision

on Musk’s side of Bob Swan, a respected Silicon Valley financial professional and

former CEO of Intel Corporation. Swan had been in regular contact with Segal,

and had been leading defendants’ purported effort to consummate the debt

financing.

105. Then, in his June 17 lawyer letter, Musk demanded a collection of

financial information he claimed was necessary to “better understand the state of

Twitter’s business and outlook, which is related to his acquisition plans and his

financing for the transaction.” He demanded a “working, bottoms-up financial

model for 2022,” budget plans with underlying modeling, and a “working copy” of

Goldman Sachs’s “valuation model underlying its fairness opinion.” This demand

is extremely unusual in merger transactions, and neither in conveying the demand

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nor at any time since have defendants pointed to a request from any lender that

would justify it. Notably, Musk’s debt financing commitments are not conditioned

on receipt of any financial information about Twitter other than that contained in

its quarterly SEC filings. Ex. 2 § 1, E-2 (Ex. E) § 6.

106. Around the same time as the request, on June 21, 2022, Musk falsely

represented in a Bloomberg interview that an item requiring resolution “before the

transaction can complete” is “will the debt portion of the round come together?”

As Musk well knew, financing expressly is not a condition to closing under the

agreement.

107. Still, intent on facilitating the merger’s consummation, Twitter

provided Musk with significant supporting detail for its proxy case projections,

shared some of its financial plans, and gave him a copy of its bankers’ final

presentation to Twitter’s board.

VII. Defendants materially breach their obligations to work toward closing

and refrain from unreasonable withholding of consent to operational
changes

108. Consummating a merger agreement involves substantial effort and

requires a serious deployment of resources by the seller. Defendants thus are

subject to contractual obligations requiring them to take actions necessary to close

and to allow Twitter to operate as efficiently as possible in the interim. Defendants

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violated two important obligations of this kind: the duty to work toward finalizing

the financing for the closing and the obligation to consider consents reasonably.

A. Defendants abandon financing-related efforts and breach

Section 6.10(d)

109. Musk’s distortive public statements about the deal, and his

increasingly aggressive information demands through counsel, raised Twitter’s

suspicion that he was secretly abandoning efforts to finalize the committed debt

financing in time for a prompt closing. Section 6.10 requires defendants to take all

steps necessary to secure the already-committed financing for the closing.

110. Twitter’s concern deepened when, on June 23, 2022, Musk texted

Twitter management to say that he had asked Swan “to depart the deal

proceedings, as we are not on the same wavelength.” At the same time, Musk said

he was “trying to prepare the cash flow projections necessary to secure the debt,”

and asked for Twitter’s “cash flow projections over the next three years” and a

comparison of historical projections to actuals — to assist “debt issuers” who “are

much more conservative than equity investors.” Customarily, projections are

needed well in advance of closing and before approaching ratings agencies, which

is a key first step in consummating debt financing. They are the buyer’s, not the

seller’s, responsibility. See Ex. 1 § 6.11.

111. Over the ensuing days, Twitter’s repeated requests for a contact in lieu

of Swan generated no response. Outreach by Goldman Sachs and J.P. Morgan to

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Morgan Stanley likewise was met with silence.

112. Faced with this uncertainty and with Musk’s insinuations about his

lenders, on June 28 and again on July 6, Twitter exercised its rights under Section

6.10(d) of the merger agreement to formally seek information about the status of

Musk’s financing.

113. Defendants still have provided no substantive response. Instead, the

day after the first of these requests, Musk warned Agrawal and Segal to back off:

114. On June 30, 2022, Musk informed Segal that replacement team

member (and long-time Musk confidant) Antonio Gracias would be taking over the

financing effort that Swan had helmed. But Gracias never appeared.

B. Musk delays and stymies key operational decisions

115. Since signing, Twitter has complied in all respects with its obligation

under Section 6.1 of the merger agreement to operate the business in the ordinary

course. In an excess of caution, the company has sought Musk’s consent even for

matters falling well within the zone of commercial reasonableness. Though Musk

has approved some of Twitter’s requests, he has been slow to respond to ones that

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required urgency and has unreasonably withheld his consent to others, in breach of

his own obligations under Section 6.1.

116. Most notably, Musk has unreasonably withheld consent to two

employee retention programs designed to keep selected top talent during a period

of intense uncertainty generated in large part by Musk’s erratic conduct and public

disparagement of the company and its personnel.

117. During negotiation of the merger agreement, Twitter had sought

Musk’s consent to a broad retention plan. Musk’s team deferred decision on the

matter; the plan Twitter proposed was detailed, and time for negotiation was short.

But Musk indicated he was open to further discussion.

118. During a May 6, 2022 post-signing diligence session, Twitter

management again broached the subject of retention, and Musk was non-

committal. He suggested the matter be tabled pending further clarity on the

expected interval before closing the deal.

119. Over the weeks that followed, Swan discussed with Twitter

management a narrower retention plan than the one that had been discussed during

the merger agreement negotiations. Consistent with those discussions, on June 20,

2022, Twitter sent defendants a formal request for consent to two tailored

employee retention programs that had been vetted by the board and its

compensation committee with the assistance of an outside compensation

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consultant.

120. Musk initially failed to respond at all to the June 20 consent request.

(It would soon become clear that he had fired Swan.) After a follow-up request for

consent, Musk’s counsel stated tersely that “Elon is not supportive of this program

and has declined to grant consent for it.” Twitter offered to arrange a meeting

between Musk and Lane Fox to explain the importance and utility of the proposed

programs. Musk’s counsel repeated that Musk “doesn’t believe a retention

program is warranted in the current environment,” and said Musk was unwilling to

consider the advice of compensation consultants, but left open the possibility of

speaking with Lane Fox.

121. On June 28, 2022, following further stonewalling from Musk’s

counsel, Twitter urged that a discussion would be fruitful. After initially

suggesting Musk might be “amenable to a call next week,” Musk’s counsel replied,

“Elon already gave his response but I’ll remind him of Martha’s request for a call.”

The call never happened — Musk has continued to duck it — and neither retention

program has been implemented due to defendants’ unexplained and unreasonable

withholding of consent. Employee attrition, meanwhile, has been on the upswing

since the signing of the merger agreement.

122. Defendants have unreasonably withheld consent in other domains as

well. On June 14, 2022, Twitter sought consent to terminate Twitter’s existing

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revolving credit facility, noting that no amounts were presently drawn under the

facility and that the facility would have to be terminated in connection with the

merger’s consummation. Maintaining the facility requires Twitter to incur ongoing

monthly costs. After initially saying he would consent to the termination, Musk

withdrew it the next day without explanation.

VIII. Defendants purport to terminate the merger agreement

123. On July 8, 2022, defendants’ counsel sent a letter to Twitter

purporting to terminate the merger agreement.

124. The notice alleges three grounds for termination: (i) purported breach

of the information-sharing and cooperation covenants contained in Sections 6.4

and 6.11; (ii) supposed “materially inaccurate representations” incorporated by

reference in the merger agreement that allegedly are “reasonably likely to result

in” a Company Material Adverse Effect; and (iii) purported failure to comply with

the ordinary course covenant by terminating certain employees, slowing hiring,

and failing to retain key personnel. Ex. 3.

125. These accusations are pretextual and have no merit.

A. Twitter has not breached its information-sharing or

cooperation covenants

126. Twitter has provided defendants far more information than they are

entitled to under the merger agreement. Section 6.4 serves the narrow purpose of

giving Parent reasonable access to information necessary to close the merger. It

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does not give defendants a broad right to conduct post-signing due diligence of a

kind they specifically forswore pre-signing. Much less does it give Musk the right

to hunt for evidence supporting a bogus misrepresentation theory developed to try

to torpedo the deal.

127. In any event, Twitter has bent over backwards to provide Musk the

information he has requested, including, most notably, the full “firehose” data set

that he has been mining for weeks — and has been continuing to mine since

purporting to terminate — with the assistance of undisclosed data reviewers.

Twitter has also spent weeks and dedicated considerable resources to compiling

information responsive to Musk’s numerous other requests for custom reporting of

user data. Musk and his representatives have received extensive data underlying

Twitter’s process for estimating false or spam accounts as a percentage of mDAU,

including the granular monthly reporting identifying each of the sampled accounts

by “user id” and the determination as to whether the account was false or spam,

along with the calculations supporting Twitter’s estimates, going back to January

1, 2021.

128. In their termination notice, defendants list categories of information

they claim Twitter has withheld. Most of this information does not exist, has

already been provided, or is the subject of requests only made recently, in response

to which Twitter had been yet again compiling responsive information when it

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received the termination notice. All of this information sweeps far beyond what is

reasonably necessary to close the merger. Defendants also complain about rate and

query limits initially accompanying the firehose data. But those limits were part of

the customary commercial terms defendants initially requested, and, as defendants

acknowledge, Twitter increased the limits immediately upon request before the

purported termination.

129. As to Twitter’s cooperation obligation under Section 6.11, the

company has again gone well beyond what is required. The point of this provision

is to assist Parent in furnishing the lenders and underwriters with information to

facilitate syndication of the already-committed financing. Twitter is not obligated

to provide financial information not already in existence, or to provide copies of its

bankers’ valuation models, which are outside the company’s control. Parent, not

Twitter, is responsible for providing the “prospects, projections and plans for the

business and operations of” the company. Ex. 1 § 6.11.

130. Even so, in response to the request defendants lodged for the first time

on June 17, Twitter made the extraordinary ask of its bankers to give Musk the

final board deck they presented in connection with the merger. It furnished Musk

with other financial information he requested. It did so even though Musk has

cited no demand from any lender — and no reason related to any obligation under

any relevant contract — that would support these requests. There has been no

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breach, and there would be none even if the state of Twitter’s cooperation

remained the same at the end of the cure period.

B. Twitter’s representations in its SEC filings supply no basis

for termination

131. Nor can defendants show that Twitter has made any representation or

collection of representations the inaccuracy of which is “reasonably likely to result

in” a Company Material Adverse Effect. They do not even try. Notwithstanding

that defendants have received mountains of information regarding Twitter’s

processes, far beyond what they are entitled to under the merger agreement, their

termination notice asserts only that “[p]reliminary analysis by Mr. Musk’s

advisors” of the vast data set Twitter provided to Musk after signing “causes Mr.

Musk to strongly believe” Twitter’s reported estimates have been inaccurate. Ex. 3

at 6. Musk’s claimed “belie[f]” is of course no proof of misrepresentation, much

less of a Company Material Adverse Effect — which can be established only by

clearing an extraordinarily high bar that is nowhere in sight here.

C. Twitter did not breach the ordinary course covenant

132. Having unreasonably withheld consent to programs designed to retain

key personnel, Musk now claims that Twitter breached Section 6.1 by terminating

some employees and failing to retain others who wished to leave. Like the others,

this claim is meritless and contrived.

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 133. While erring on the side of seeking consent, Twitter has continued to

operate in the ordinary course respecting routine management decisions, including

decisions concerning termination and hiring of individual employees. In early

May, Twitter let go of two executives and announced it would be “pausing most

hiring and backfills” as positions became vacant. Musk’s counsel was notified of

those decisions at the time and raised no objection.

134. Consistent with its hiring slowdown, Twitter announced on July 7,

2022 that it was reducing its recruiting staff — a small segment of Twitter’s total

employee base — by about 30%.

135. These decisions aligned with Musk’s own stated priorities. Days after

signing, on April 28, 2022, Musk texted Twitter’s board chair to say his “biggest

concern is headcount and expense growth.” In a meeting with Twitter

management on May 6, 2022, Musk again asserted that the company’s headcount

was high and encouraged management to consider ways to cut costs. Musk

repeated these themes in conversations with Agrawal and Segal throughout May

and June. On June 16, Musk held a virtual meeting with Twitter employees.

Asked what he was “thinking about layoffs at Twitter,” Musk responded that

“costs exceed the revenue,” “so there would have to be some rationalization of

headcount and expenses.” In his final conversation with Segal before purporting to

terminate, Musk expressed his concern about Twitter’s expenses and asked why

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Twitter was not considering more aggressive cost cutting. And, as noted, Musk

has refused to approve — or even discuss — Twitter’s proposed retention

programs for key employees.

136. Twitter specifically negotiated for the right to terminate employees,

including executives, without first having to obtain Musk’s consent. Musk had

notice back in early May of many of the actions about which he now complains for

the first time. He did not object then or at any point prior to his purported

termination notice on July 8, because there was no violation.

D. Having materially breached the merger agreement,

defendants are contractually barred from terminating

137. The merger agreement provides that if defendants are in material

breach of their own obligations under the merger agreement, they cannot exercise

any termination right they might otherwise have. Ex. 1 § 8.1(d)(i).

138. As set forth above, defendants materially breached their obligation to

use their reasonable best efforts to complete the merger, id. § 6.3(a), materially

breached the hell-or-high-water covenant requiring them to do all things necessary

to consummate and finalize financing, id. § 6.10(a), materially breached their

obligation to provide Twitter with information regarding the status of debt

financing, id. § 6.10(d), materially breached their obligation to refrain from

unreasonably withholding consent to operational decisions, id. § 6.1, materially

breached their obligations to seek Twitter consent to public comments about the

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deal and refrain from disparaging the company or its representatives in Tweets

about the merger, id. § 6.8, and materially breached their obligation not to misuse

confidential information, id. § 6.4. They therefore cannot terminate the agreement

even assuming they otherwise had such a right.

IX. After purporting to terminate, Musk keeps violating and confirms his
earlier violations

139. After purporting to terminate the deal, Musk continued to make public

statements disparaging Twitter and confirming the pretextual nature of his post-

signing conduct.

140. In the early morning of July 11 (Eastern time), Musk posted Tweets

implying that his data requests were never intended to make progress toward

consummating the merger, but rather were part of a plan to force litigation in

which Twitter’s information would be publicly disclosed:

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 141. For Musk, it would seem, Twitter, the interests of its stockholders,

the transaction Musk agreed to, and the court process to enforce it all constitute an

elaborate joke.

142. Musk also, once again, publicly called for the SEC to investigate

Twitter’s disclosures regarding false and spam accounts:

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 143. Musk’s conduct simply confirms that he wants to escape the binding

contract he freely signed, and to damage Twitter in the process.

X. Twitter faces irreparable harm absent relief

144. Because of defendants’ breaches and the uncertainty they have

generated, Twitter faces irreparable harm. Defendants stipulated in the merger

agreement that “irreparable damage for which monetary damages, even if

available, would not be an adequate remedy would occur in the event that the

parties hereto do not perform the provisions of this Agreement (including failing to

take such actions as are required of it hereunder to consummate this Agreement) in

accordance with its specified terms or otherwise breach such provisions.” Ex. 1

§ 9.9(a).

145. The expected closing date for the merger is fast approaching. The

lone remaining application for regulatory approval is under consideration and the

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parties have received no indication of any obstacle on that front. Twitter is

prepared to schedule a stockholder vote immediately upon clearance by the SEC of

its proxy statement, as early as mid-August. Defendants must close “no later than”

two business days after satisfaction of the closing conditions. Id. § 2.2.

146. Defendants’ actions in derogation of the deal’s consummation, and

Musk’s repeated disparagement of Twitter and its personnel, create uncertainty and

delay that harm Twitter and its stockholders and deprive them of their bargained-

for rights. They also expose Twitter to adverse effects on its business operations,

employees, and stock price.

147. Swift remedial action in the form of specific performance and

injunctive relief is warranted.

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 CAUSE OF ACTION
(Breach of Contract — Specific Performance & Injunction)

148. Twitter repeats and incorporates by reference the allegations above.

149. The merger agreement is a valid and enforceable contract.

150. Twitter has fully performed all of its obligations under the merger

agreement to date, and is ready, willing, and able to continue so performing.

151. Defendants have breached the merger agreement by, among other

things, violating Sections 6.1, 6.3, 6.4, 6.8, and 6.10.

152. In Section 9.9(a), each of the parties agreed that, without posting bond

or other undertaking, the other parties “shall be entitled to an injunction, specific

performance and other equitable relief to prevent breaches of this Agreement and

to enforce specifically the terms and provisions hereof, in addition to any other

remedy to which they are entitled at law or in equity.”

153. In Section 9.9(b), the parties expressly “acknowledged and agreed that

the Company shall be entitled to specific performance or other equitable remedy to

enforce Parent and Acquisition Sub’s obligations to cause the Equity Investor to

fund the Equity Financing, or to enforce the Equity Investor’s obligation to fund

the Equity Financing directly, and to consummate the Closing” if three conditions

are met: (i) all of the conditions set forth in Section 7.1 and Section 7.2 have or

will be satisfied at the closing; (ii) the debt financing has been funded or will be

funded at the closing if the equity financing is funded; and (iii) the company has

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confirmed that the closing will occur.

154. All of the conditions set forth in Sections 7.1 and 7.2 have been

satisfied or waived, or are expected to be satisfied or waived at the closing, and the

closing will occur if the debt and equity financing are funded, which funding is

solely within the control of defendants.

155. Twitter has suffered and will continue to suffer irreparable harm as a

result of defendants’ breaches.

PRAYER FOR RELIEF

WHEREFORE, Twitter respectfully requests that the Court enter judgment

and relief against defendants, as follows:

A. Granting all relief requested in this complaint to the extent permitted

under the merger agreement;

B. Ordering defendants to specifically perform their obligations under

the merger agreement and consummate the closing in accordance with

the terms of the merger agreement; and

C. Granting such injunctive relief as is necessary to enforce the decree of

specific performance.

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 POTTER ANDERSON & CORROON LLP
OF COUNSEL:
By: /s/ Peter J. Walsh, Jr.
William Savitt Peter J. Walsh, Jr. (No. 2437)
Bradley R. Wilson Kevin R. Shannon (No. 3137)
Sarah K. Eddy Christopher N. Kelly (No. 5717)
Ryan A. McLeod (No. 5038) Mathew A. Golden (No. 6035)
Anitha Reddy 1313 North Market Street
WACHTELL, LIPTON, Hercules Plaza, 6th Floor
ROSEN & KATZ Wilmington, DE 19801
51 West 52nd Street (302) 984-6000
New York, NY 10019
(212) 403-1000 Attorneys for Plaintiff Twitter, Inc.
Brad D. Sorrels (No. 5233)
WILSON SONSINI GOODRICH &
ROSATI, P.C.
222 Delaware Avenue, Suite 800
Wilmington, DE 19801
(302) 304-7600

Dated: July 12, 2022

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