$44 billion of Elon Musk repurchase of Twitter is facing legal challenge. A retirement fund in Florida is to sue Musk and Twitter, argue that the deal cannot legally close until 2025 due to the billionaire owning a stake in the platform. The proposed class action – filed by the Orlando Police Retirement Fund today in Delaware Chancery court – also claims that Twitter’s board of directors violated its fiduciary duty by allowing the deal to be settled. perform. In addition to Musk and Twitter, the lawsuit names former Twitter CEO Jack Dorsey, current Twitter CEO Parag Agrawal, and the company’s board as defendants.
In a message to Engadget, Tulane Law School professor Ann M. Lipton said the lawsuit raises “some very new issues” under Delaware corporate law. Under one law known as Section 203, shareholders who own more than 15% of the company’s shares cannot proceed with the merger without the approval of the remaining two-thirds of the shares. Without this approval, the merger cannot be completed for another three years.
The fund’s attorneys say that Musk originally owned about 10% of Twitter shares, which is unlikely to apply to Section 203. However, the fund argued, however, that Musk had made an agreement with Morgan Stanley (which owns it). 8.8% stake) and former CEO Jack Dorsey (who has 2.4%) to push the deal. The combined shares of these parties allegedly make Musk and his allies in the takeover an “interested shareholder” under Section 203 – this, if the court agrees on underlying grounds presented in the case, which means that the merger must be delayed or approved. Shareholders represent at least two-thirds of the company’s ownership.
“Section 203 is not subject to frequent litigation, and so the question of whether Musk’s relationship with these parties can actually count for statutory purposes is an unanswered and will be interesting question. Taste to see how it plays out,” Lipton wrote.
Details of Musk’s highly complicated $44 billion purchase of Twitter have been made public since the social media platform Has been approved billionaire’s offer last month. New York Times reported that Musk promised investors get close to five to ten times their investment if the deal is successful. Parts of the deal are under scrutiny, including that it depends on foreign investors and whether Musk bought shares within a particular company to influence its leadership. But antitrust experts say the merger is unlikely to be prevented by the FTC. The agency will decision next month, whether to expedite the merger or launch a longer-term investigation.
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