Florida Pension Fund Disputes Elon Musk’s Takeover of Twitter

The first lawsuit against Elon Musk and his takeover of Twitter, the operation may not be completed until 2025.

Elon Musk’s $44 billion takeover of Twitter faces first legal challenge. The Florida Pension Fund is attacking the multi-billionaire and Twitter, claiming that this deal cannot be legally finalized until 2025 due to his stake in the platform. A possible class action lawsuit filed most recently with the Delaware Chancery also alleges that members of the Twitter board of directors violated their fiduciary duties by allowing the deal to proceed. In addition to Elon Musk and Twitter, the statement also names former CEO Jack Dorsey, current CEO Parag Agrawal and the board as defendants.

First legal action against Elon Musk and his takeover of Twitter

In a post to Engadget, Ann M. Lipton, a professor at Tulane Law School, said the case raises “some new questions”under Delaware law. Under section 203, shareholders holding more than 15% of a company’s shares cannot initiate a merger without the approval of the transaction by two-thirds of the remaining shares. Without this permission, the merger cannot be completed within three years.

Pension fund lawyers say that Elon Musk originally owned about 10% of Twitter, which would not have been covered by Section 2023, but according to the fund, Elon Musk entered into an agreement with Morgan Stanley (which owns 8.8% of the shares) and the former CEO director Jack Dorsey (he owns 2.4%) to move the deal forward. The combined shares of these different parties are subject to Section 2023, which, if the court rules with the plaintiffs, means the deal will have to be delayed for three years or a shareholder agreement must be obtained for at least two years. thirds.

The deal may not be completed before 2025.

“Section 2023 is not often used in court. Whether Elon Musk’s dealings with these other parties are legitimate is an unanswered question, it will be interesting to see how they end up,” wrote Ann M. Lipton.

A number of details about Elon Musk’s $44 billion financial package have been released since the platform accepted the billionaire’s offer last month. The New York Times reported that Elon Musk promised investors 5x to 10x returns if the deal went through. Aspects of this deal are analyzed, including its attractiveness to outside investors and the question of whether Elon Musk bought the company’s shares specifically to influence management. But antitrust experts seem to believe the acquisition will not be blocked by the FTC. The agency will decide next month whether to approve the operation immediately or conduct a full investigation.