“Musk apparently believes that he – unlike every other party subject to Delaware contract law – is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” said the lawsuit.
The lawsuit sets in motion what promises to be one of the biggest legal showdowns in Wall Street history, involving one of the business world’s most colorful entrepreneurs in a case that will turn on staid contract language.
Also read | Was Elon Musk ever the right man to ‘save’ Twitter, or indeed our planet?
On Friday, Musk said he was terminating the deal because Twitter violated the agreement by failing to respond to requests for information regarding fake or spam accounts on the platforms, which is fundamental to its business performance.
Musk, who is the chief executive officer of electric vehicle maker Tesla Inc, did not immediately respond to a request for comment.
Also read | Elon Musk on Trump saying he voted for him: ‘Not true’. Then an advice
The lawsuit accused Musk of “a long list” of violations of the merger agreement that “have cast a pall over Twitter and its business.”
Shares of the social media platform fell to $34.06 on Tuesday, sharply below the levels above $50 where it traded when the deal was accepted by Twitter’s board in late April.
Musk said he was terminating the merger because of the lack of information about spam accounts and inaccurate representations that he said amounted to a “material adverse event.” He also said executive departures amounted to a failure to conduct business in the ordinary course, as Twitter was obligated to do.
Twitter said it negotiated to remove from the merger agreement language that would have made such firings a violation of ordinary course requirement.
Twitter called the reasons cited by Musk a “pretext” that lacked merit and said his decision to walk away had more to do with a decline in the stock market, particularly for tech stocks.
Tesla’s stock, the main source of Musk’s fortune, has lost 30% of its value since the deal was announced and closed on Tuesday at $699.21.
Legal experts have said that from the information that is public Twitter would appear to have the upper hand because of the way Musk negotiated the deal, declining to do traditional pre-merger diligence.