In 2022, the law firm Wachtell, Lipton, Rosen & Katz represented Twitter in a high-profile legal battle with Elon Musk, who was trying to reverse an agreement to buy the social media company. Nine months later, Twitter — now led by a vengeful Musk — is suing Wachtell.
According to the lawsuit filed in California Superior Court, Wachtell attorneys convinced former Twitter management to agree to pay a “success fee” if Musk goes through with the deal — part of the $90 million in fees that the Law firm allegedly in the days before had agreed to the sale.
“Wachtell took advantage of a corporate client left vulnerable by lame trustees who had lost their motivation to act in Twitter’s best interests until the imminent sale to Elon Musk,” according to attorneys for X Corp., the new parent company owned by Musk.
Why Musk had to follow and buy Twitter
After Musk signed a deal to buy Twitter for $54.20 a share, he tried to extricate himself. But Musk didn’t have a great case. In the merger documents, he agreed to a “specific performance clause” — which, legally speaking, meant that withdrawing from the deal could result not only in civil penalties, but also in a judge forcing him to close the deal and take over Twitter.
In the face of an uphill battle in a Delaware court case, Musk finally relented and finalized the deal to buy Twitter on October 27, 2022.
Go to the Legal tab on Twitter?
Musk’s lawyers essentially allege that Wachtell made a quick effort on Twitter — and that his outgoing executives were more than happy to switch, paying millions to Wachtell and the company that Musk would soon own. incur a high court bill.
The lawsuit alleges that Wachtell “was at the center of a spending spree by outgoing Twitter executives who fueled Twitter, among other things, by improperly paying substantial gifts to preferred law firms like Wachtell in addition to the law firms.” companies are paid tens of millions of dollars in ‘success’ or ‘project’ fees.”
Neither Wachtell nor William Savitt, an attorney mentioned in the complaint, responded to a request for comment. Twitter does not have a communications department and executives there could not be reached for further comment.
Musk’s financial woes are mounting
Musk has had no shortage of financial troubles since taking over Twitter and burdening the company with debt from his leveraged buyout.
Musk, one of the richest people in the world, bought Twitter with $12.5 billion in bank loans and $7 billion in equity financing from investors including Oracle’s Larry Ellison and struggling crypto firm Binance.
Twitter now owes $1 billion annually to service its debt. To even those scores, Musk laid off most of Twitter’s employees, locked out many of Twitter’s features as part of a $8-per-month Twitter Blue subscription with a paywall, and began giving developers access to the Twitter API in a usage tier to charge, which was formerly offered free of charge.
Musk has invented creative ways to save pennies — for example, by denying laid-off employees decent severance pay and refusing to pay the company’s rent at its various offices.
But a $90 million legal bill remains a tough task for a beauty shop owner who’s spent more time posting transphobic memes on his website than balancing his company checkbook. All of this leaves him with an urgent concern: he must look for any financial relief he can get.