In 2022, the law firm Wachtell, Lipton, Rosen & Katz represented Twitter in a high-profile legal dispute with Elon Muskwho was trying to go back on an agreement to buy the social media company. Nine months later, Twitter – now run by a vengeful Musk – is suing Wachtell.
In accordance the lawsuitfiled in the California Supreme Court, Wachtell lawyers persuaded Twitter’s former management to agree to pay a “success fee” if Musk closed the deal — part of the $90 million in fees the law firm reportedly arranged in the days leading up to the sale.
“Wachtell took advantage of a corporate client who was unprotected by lame duck fiduciaries who had lost motivation to act in Twitter̵[ads1]7;s best interest pending the impending sale to Elon Musk,” according to lawyers for X Corp., Twitter’s new parent company under Musk’s ownership.
Why Musk had to go along and buy Twitter
After Musk signed a deal to buy Twitter at $54.20 per share, he tried to squirm out of it. But Musk had no big deal. In the merger documents, he agreed to a “specific performance” clause — legal-speak means that pulling out of the deal might not only lead to civil penalties, but to a judge forcing him to complete the deal and take over Twitter.
Staring down one uphill battle in a lawsuit in Delaware, Musk finally relented and terminated the agreement to buy Twitter on October 27, 2022.
Are you moving up in the legal category on Twitter?
Essentially, Musk’s lawyers argue that Wachtell took a quick one on Twitter — and that its outgoing executives are more than happy to roll over, dole out millions to Wachtell and sell the company, soon to be under Musk’s ownership, with a hefty legal bill.
Wachtell, the complaint alleges, was “at the center of a spending spree by Twitter’s outgoing executives that ran afoul of Twitter by, among other things, facilitating the improper payment of significant gifts to preferred law firms such as Wachtell at the top of the firms’ full hourly billing by list tens of millions of dollars in handouts to the firms as ‘success’ or ‘project’ fees.”
Neither Wachtell nor William Savitt, an attorney named in the complaint, responded to a request for comment. Twitter has no communications department and leaders there could not be reached for further comment.
Musk’s financial problems are mounting
Musk has had no shortage of financial problems since he took over Twitter and saddled it with debt from his leveraged buyouts.
Musk, one of the world’s richest people, bought Twitter with $12.5 billion in bank loans and $7 billion in equity financing from investors including Oracle’s Larry Ellison and contested crypto firm Binance.
Twitter owes now 1 billion dollars annually to service their debts. To offset these bills, Musk laid off most of Twitter’s employeespaywalled many of Twitter features as part of a $8 per month Twitter Blue subscription, and started charge developers to access Twitter’s API at usage levels it used to offer for free.
Musk has come up with creative ways to save kroner – for example by refusing to lay off employees proper farewell and by refusing to pay the company’s rent in their various offices.
But a $90 million legal bill is still a heavy lift for a vanity owner who has spent more time laying out transphobic memes on his website than balancing the company’s checkbook. It all leaves him with a pressing concern: looking for any financial break he can get.