Florida pension fund sues Elon Musk, Twitter to halt deal
Musk's acquisition of Twitter could face some legal obstacles as a class action lawsuit is taking place against him to push the deal until 2025.
A Florida pension fund sued billionaire Elon Musk and his newly acquired corporation, Twitter, with the aim of curbing Musk's $44 billion takeover of the social media company and pushing it until at least 2025.
In a proposed class-action lawsuit filed in Delaware Chancery Court, the Orlando police pension fund said the law in Delaware forbade a quick merger, as Musk had agreements with other major shareholders in the firm, including his financial adviser Morgan Stanley and Twitter founder Jack Dorsey, to back the sale.
According to the fund, the agreements technically made Musk, the holder of 9.2% of Twitter, the effective "owner" of more than 15% of the company's shares, which required delaying the merger by three years unless two-thirds of the shares he did not own approved of the sale.
Stanley alone owns about 8.8% of Twitter shares and Dorsey owns 2.4%, helping Musk with his $54.20 per share acquisition, which he hopes to complete this year, marking one of the world's largest leveraged buyouts.
This would add to Musk's roster of owned companies, as the world's richest person also runs Tesla and leads The Boring Co and SpaceX.
The defendants in the case raised against Twitter, which seeks to declare that its directors breached their fiduciary duties and recoup legal fees and costs, also include Dorsey and CEO Parag Agrawal. However, it did not clarify how shareholders believed they might be harmed if the merger were to close on schedule.
Under Musk, the company will reduce its advertisement from 90% to nearly 45% of the company's total revenue. Advertising would also generate $12 billion in revenue and subscriptions nearly $10 billion in 2028, according to the filing with the US Securities and Exchange Commission, the publication reported.
Twitter had agreed last week to be acquired for some $44 billion by Elon Musk, just weeks after the tech giant implemented a policy to prevent a hostile takeover by the billionaire.
The move taken by Twitter follows an offer filed by Musk to purchase 100% of Twitter for $54.20 per share, putting the company's value at $44 billion.
When Musk acquires Twitter, it is unlikely that its current CEO, Parag Agrawal, will remain in his position, as the billionaire had previously criticized the company's policies and its current management. However, since Musk is the head of various companies, it is unlikely that he will personally run the platform.
He claimed that he wanted to make Twitter "better than ever" by adding new features to the platform, such as making the algorithms open source to boost trust in the company, eliminating spam bots, and authenticating all human users of the platform, a step that is widely considered as a major violation of privacy.