Elon Musk’s $44 Billion Twitter Purchase Challenged in Shareholder Lawsuit

Elon Musk and Twitter Inc were sued Friday by a Florida pension fund seeking to block Musk from completing his $44 billion acquisition of the social media company before 2025.

In a proposed class action lawsuit filed in Delaware Chancery Court, the Orlando Police Pension Fund said Delaware law prohibited a quick merger because Musk had deals with other big Twitter shareholders, including his financial adviser Morgan. Stanley and Twitter founder Jack Dorsey to back the purchase.

The fund said those deals made Musk, who owns 9.6% of Twitter, the beneficial “owner” of more than 15% of the company’s shares. He said that required delaying the merger for three years unless two-thirds of the shares not “owned” by him granted approval.

Morgan Stanley owns about 8.8% of Twitter shares and Dorsey owns 2.4%.

Musk expects to complete his acquisition of Twitter for $54.20 per share this year, in one of the world’s largest leveraged buyouts.

He also runs the electric car company Tesla Inc, leads The Boring Co and SpaceX, and is the richest person in the world according to Forbes magazine.

Twitter and its board, including Dorsey and CEO Parag Agrawal, were also named as defendants.

Twitter declined to comment. Lawyers for Musk and the Florida fund did not immediately respond to requests for comment.

The lawsuit also seeks to declare that Twitter’s directors breached their fiduciary duties and to recover legal fees and costs. He did not clarify how shareholders believed they might be hurt if the merger closed on time.

On Thursday, Musk said he had raised about $7 billion, including from sovereign wealth funds and friends in Silicon Valley, to help finance an acquisition.

Musk had no planned funding when he announced plans to buy Twitter last month.

Some of the new investors appear to share interests with Musk, a self-described free speech absolutist who could change the way the San Francisco-based company moderates content.

The Florida state pension fund also invests in Twitter, and Governor Ron DeSantis said this week that he could make a $15 million to $20 million profit if Musk completes his purchase.

In afternoon trading, shares of Twitter were down 60 cents at $49.76.

The case is Orlando Police Pension Fund v Twitter Inc et al, Delaware Chancery Court, No. 2022-0396.

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