May 20, 2022
Elon Musk

Elon Musk and Twitter are being sued by a Florida pension fund seeking to prevent Musk’s $44 billion takeover of the social giant, claiming that the deal cannot go ahead until 2025.

The Orlando Police Pension Fund filed a proposed class action in Delaware Chancery Court, claiming that agreements Musk had in place with other major shareholders constituted effective ownership of those shares. Were the court to rule that this is the case it would make Musk the “owner” of more than 15% of Twitter’s shares, a position the fund argues would require the merger to be delayed by three years barring approval from two-thirds of remaining shareholders.

The legal argument rests on the accusation that Musk had agreements in place with Twitter founder Jack Dorsey and other major shareholders, including Musk’s financial adviser Morgan Stanley, to support the buyout.

Morgan Stanley owns approximately 8.8% of Twitter shares whilst Dorsey now owns just 2.4% having sold most of his stake in the company he founded. Combined with the 9.6% owned by Musk, this would push the billionaire well beyond the 15% mark should the court rule he was the effective owners of those shares.

The lawsuit also claims that Twitter directors breached their fiduciary duties, and seeks to recover legal fees and costs. The suit did not specify specifically how investors might be harmed if the merger was allowed to go ahead on the current timeline.

Twitter and its board, including Dorsey and Chief Executive Parag Agrawal, were named as defendants alongside Musk.

All parties involved are remaining tight-lipped on the matter, with no comment on the case from Twitter or lawyers for Musk and the fund.