The Twitter Merger Might Not Tweet

"In a proposed class action filed in Delaware Chancery Court, the Orlando Police Pension Fund said Delaware law forbade a quick merger because Musk had agreements with other big Twitter shareholders, including his financial adviser Morgan Stanley (MS.N) and Twitter founder Jack Dorsey, to support the buyout."- Reuters Legal, May 6, 2022

That lawsuit is "Orlando Police Pension Fund v. Twitter, et. al." The et al. include Dorsey and current CEO Parag Agrawal. 

Essentially, here is the beef. The pension fund contends that Musk who does own 9.6% of Twitter really is the effective "owner" of more than 15% of Twitter shares. According to Delaware law, there is a requirement for a three-year delay on the implementation of the merger. The way to bypass that requirement is if there is approval of the merger by two-thirds of those who own the shares he doesn't. Those parties cannot be associated with Musk. They must be "disinterested."

The lawsuit requests:

  • 3-year delay on the merger
  • Have declared that Twitter directors breached their fiduciary duties
  • Have repaid their legal costs and any fees.

Filing a lawsuit, especially a possible class action one, can be a very powerful weapon. One reason is that the law is a slow-moving process. The litigation, if allowed to move forward, can generate years of motions. A trial decision frequently can be appealed.

Another wrench in the works could be if the FTC, after an initial review of the merger, requests more information. That means a delay. And then something worse. Currently, the Open Markets Institute, where FTC Chairperson Lina Khan got her start in antitrust issues, is pushing against the merger. Meanwhile House Republicans are pushing back on Open Markets. Here is Law and More's summary of that situation.

Connect with Editor-in-Chief Jane Genova at janegenova374@gmail.com.

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