Elon Musk and Twitter were sued on Friday by a Florida pension fund that tried to stop Musk from completing its $ 44 billion takeover of the social media company before 2025.
In a proposed class action lawsuit filed in the Delaware Chancery, the Orlando Police Retirement Fund said the Delaware Act prohibited a quick merger because Musk had agreements with other major Twitter shareholders, including his financial adviser Morgan Stanley and Twitter founder Jack Dorsey, to support buy out.
The fund said that these agreements made Musk, which owns 9.2% of Twitter, the effective “owner” of more than 15% of the company’s shares. It said it required a three-year postponement of the merger unless two-thirds of the shares not “owned” by him were approved.
Morgan Stanley owns around 8.8% of Twitter shares and Dorsey owns 2.4%.
Musk hopes to complete its Twitter acquisition of $ 54.20 per share this year, in one of the world’s largest leveraged buyouts.
Musk, the world’s richest person, also runs the electric car company Tesla and heads The Boring Co and SpaceX.
Twitter and the board, including Dorsey and CEO Parag Agrawal, were also named as defendants.
Twitter declined to comment. Lawyers for the Musk and Florida Fund did not immediately respond to requests for comment.
The lawsuit also seeks to declare that Twitter directors violated their fiduciary duties, and recover legal fees and costs. It did not make clear how the shareholders thought they could be harmed if the merger was terminated according to plan.
On Thursday, Musk said he had raised about $ 7 billion, including from investors such as technology magnate Larry Ellison, Qatar’s government investment fund and the world’s largest cryptocurrency exchange, to help finance the takeover.
According to documentation from the US Securities and Exchange Commission, Ellison is investing $ 1 billion in the transaction. Saudi investor Prince Alwaleed bin Talal, who had initially opposed the acquisition, agreed to roll his $ 1.9 billion stake into the deal, according to the filing.
The filing also showed that a margin loan taken out by Musk to finance the deal would be reduced from $ 12.5 billion to $ 6.25 billion.
The financing news came when CNBC reported that Musk will serve as interim CEO of the social media platform for a few months when the agreement is terminated.
Musk had no funding in line when he announced plans to buy Twitter last month.
Some of the new investors seem to share interests with Musk, a self-proclaimed “free speech absolute” that could change the way the San Francisco-based company moderates content.
The Florida State Pension Fund is also investing in Twitter, and state Gov. Ron DeSantis said this week that it could earn $ 15 to $ 20 million if Musk completes the acquisition.
On Friday, the New York Times reported that Musk said he would quintuple revenue to $ 26.4 billion by 2028 from $ 5 billion last year, citing a proposal presented to investors.
Under Musk, the company would reduce its ad from 90% to almost 45% of the company’s total revenue. Advertising will generate $ 12 billion in revenue and subscriptions of nearly $ 10 billion by 2028, according to the document, the publication reported.
Another goal of the proposal is to increase Twitter followers to 931 million and also hire more than 3,500 additional employees. Twitter has 229 million daily users worldwide.
In afternoon trading, Twitter shares were down 60 cents to $ 49.76.