Details from a former Twitter security chief can be used as evidence, but judge strikes down a delay requested by Musk.
A US judge has ruled that Elon Musk may use new evidence from a Twitter whistleblower in his legal dispute with the social media giant, but refused Musk’s request to delay the upcoming trial.
Musk, who is attempting to cancel a previous deal to acquire Twitter for $44bn, had requested a four-week delay before the start of the trial in October. A judge denied that request on Wednesday, stating that a trial delay could damage Twitter. The trial is set to begin on October 17.
“I am convinced that even four weeks’ delay would risk further harm to Twitter too great to justify,” wrote Chancellor Kathaleen St Jude McCormick, the head judge of Delaware’s Court of Chancery.
Musk reneged on his agreement to buy Twitter in July, claiming that the company had failed to be transparent about the number of “spam” accounts on the site. Musk has said that the prevalence of such accounts misleadingly inflates the site’s number of users.
Public revelations by former Twitter security chief Peiter Zatko could bolster Musk’s prospects in the courtroom: Zatko has stated that Twitter failed to crack down on spam accounts and neglected security practices. Zatko is scheduled to testify before the US Congress about his claims next week.
“We are hopeful that winning the motion to amend takes us one step closer to the truth coming out in that courtroom,” said Alex Spiro, a lawyer for Musk, in a statement. If Musk loses in court, he could face up to $1bn in termination fees.
Shares of Twitter rose about 4 percent in early Wednesday trading to $40.15. Musk had offered $54.20 a share in his offer.
“We look forward to presenting our case in court beginning on October 17th and intend to close the transaction on the price and terms agreed upon with Mr Musk,” said a statement from a Twitter spokesperson.
The judge’s decision came after an hours-long hearing on Tuesday, during which lawyers for Musk and Twitter argued about the merits of Zatko’s claims and the speed at which both sides are producing evidence ahead of the trial.
Twitter’s lawyers downplayed the importance of Zatko’s claims to the dispute, stating that an initial 27-page complaint he sent to Twitter and a later retaliation claim did not include references to the “spam bot” issues that Musk cited as grounds for terminating the deal.
The company has said that Musk is using claims about bots as a cover for backing out of the deal he signed in April, when he agreed to pay 38 percent above Twitter’s stock price before shares of electric-car maker Tesla lost more than $100bn in value. Most of Musk’s wealth resides in shares of Tesla.
Since backing out of the deal, Musk has publicly attacked Twitter on numerous occasions, and the company has accused Musk of damaging the company’s value and reputation.
In their lawsuit, Twitter stated that 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”.
McCormick said on Wednesday that Zatko’s claims gave Musk’s legal team grounds for amending their countersuit, but did not include further details.
“I am reticent to say more concerning the merits of the counterclaims at this posture before they have been fully litigated,” she wrote. “The world will have to wait for the post-trial decision.”