Er, Musk's trial hasn't stopped, no matter what he told Twitter, says judge
Get ready for that deposition tomorrow, Elon
Updated Elon Musk's decision this week to go ahead with his Twitter purchase – after months of trying to wriggle out of the deal – hasn't automatically stopped his upcoming trial, the judge overseeing the case said today.
That suggests Musk's October 6 deposition by Twitter may go forward as scheduled.
In a letter to the social network, made public via an SEC filing yesterday, the Tesla tycoon said he would go ahead and buy Twitter after all, provided he had the debt financing in place to bankroll the acquisition and that Twitter's lawsuit against him in a Delaware court was immediately brought to a halt.
Twitter is suing Musk to force him to stick to his promise earlier this year to buy Twitter at $54.20 a share – a $44 billion package – or cough up a $1 billion break-up fee if he walked away. Musk has been trying to do neither, citing a bunch of excuses for ending the agreement, including not believing Twitter's user totals.
This week, though, he signaled he'd go with the original takeover plan anyway.
That decision follows Twitter obtaining Musk's private text messages through discovery, and making them public in court filings – messages that revealed the cringey wheeling and dealing by the billionaire's pals and him to help fund the Twitter takeover. Putting a stop to any more of those disclosures and avoiding being deposed may have driven Musk to put the deal back on the table and demand a halt to the lawsuit.
But Chancellor Kathaleen McCormick, the judge in the lawsuit, ruled [PDF] Wednesday that neither party in the case has actually filed the paperwork to pause the case. Twitter hasn't asked for a stay, nor has Musk, and his letter to the social network doesn't count.
"I, therefore, continue to press on toward our trial set to begin on October 17," Chancellor McCormick said.
That also means the SpaceX supremo's deposition – in which he will be grilled by Twitter's lawyers under oath as testimony for the case – is due to begin tomorrow, October 6. Musk has already delayed it once.
McCormick's letter makes clear she believes he has some explaining to do about text messages Twitter requested during discovery and never received. It's feared Musk at some point used a feature in the Signal messaging app to auto-delete some of his texts, which now can't be easily recovered for discovery, if at all.
As a result of this, Twitter is requesting an adverse inference against him, which is a form of legal reasoning arguing that if a defendant destroyed evidence they were ordered to produce, it's reasonable to conclude it was damaging.
"If defendants deleted documents after they were under a duty to preserve, some remedy is appropriate, but the appropriate remedy is unclear to me at this stage. I will reserve my ruling … pending post-trial briefing," McCormick said.
Is anyone happy the deal is back on?
It's unclear what Musk was ultimately playing at with the sudden reversal of his months-long fight to get out of his agreement to buy Twitter. An on-record deposition, the continued scrutiny of his private messages, and news today that he's facing possible sanctions for withholding records may be on his mind.
Unfortunately for the banks on the hook to finance $12.5 billion of the $44 billion needed to close the deal, Musk's decision couldn't have come at a worse possible moment, Reuters reports.
- Elon Musk tells Twitter: My takeover deal is back on
- Musk seeks yet another excuse to get out of Twitter buyout: This time it's Mudge's severance check
- Twitter whistleblower Zatko disses bird site as dysfunctional data dump
- Musk says Starlink will ask for exemption to US sanctions on Iran
According to the news agency, banks financing the takeover will try to resell the debt incurred during this acquisition as quickly as possible. But with a war in Ukraine, spiking interest rates, and recession fears looming, no one is willing to buy risky debt from leveraged loans, Reuters said.
Morgan Stanley, Bank of America, Barclays, and several international banks are facing what more than 10 analysts told Reuters was a poor outlook for banks trying to offload debt, of which $6.5 billion in leveraged loans and $3 billion each in secured and unsecured bonds are included in the purchase of Twitter.
Multiple debt sales by large banks have failed recently, Reuters said, pointing to $3.9 billion attached to the purchase of Lumen Technologies that failed to sell last week, and another $700 million lost when banks tried to sell $4.55 billion in debt used to buy Citrix.
Unfortunately, like Musk, those banks are on the hook for the Twitter deal, Kellner Capital portfolio manager for merger arbitrage Chris Pultz told the news wire, "and they’re facing an even bigger headache" than with the Citrix deal. Now that the world's richest man has decided (for now) to buy Twitter using their cash, Wall Street financiers are simply along for the ride, losses and all. ®
Updated to add on October 6
Elon Musk's deposition, scheduled for today and tomorrow in Austin, Texas, has been postponed, it's reported.
According to Reuters, lawyers for Musk and Twitter agreed to hold off the deposition to finalize details of the purchase.
The acquisition process could still take months to complete, and Musk's initial ask that the trial be stopped immediately required both parties to notify the courts, which Chancellor McCormick said hadn't been done.
As of this update no additional documents in the case have been filed with the Delaware Court of Chancery. While Musk's deposition may have been delayed, the trial doesn't appear to have actually been suspended.
Final update on October 6
The judge in the Twitter case has ruled Musk must complete his takeover by October 28, or the trial will continue.
The Tesla billionaire had earlier formally asked for a delay in proceedings while he figured out financing. Musk had hoped Twitter would file the necessary paperwork to halt its lawsuit, but the social network refused, putting pressure on the SpaceX boss to complete the acquisition.