In 2022, the law firm Wachtell, Lipton, Rosen & Katz represented Twitter in a high-profile profile legal dispute with Elon Muskwho was trying to go back about an agreement to buy the social media company. Nine months later, Twitter – now run by a vengeful Musk – is suing Wachtell.
According to the trialfiled in California Supreme Court, Wachtell’s 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 allegedly arranged in the days leading up to the sale.
“Wachtell took advantage of a corporate client left unprotected by lame duck fiduciaries who had lost their motivation to act in Twitter’s best interest until its 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 for $54.20 per share, he tried to squirmed out of it. But Musk didn’t have a good case. In the merger documents, he agreed to a “specific performance” clause — legalese, meaning that pulling out of the deal not only leads to civil penalties, but to a judge forcing him to implement the deal and take over Twitter.
Staring down one uphill battle in a lawsuit in Delaware, Musk finally relented and closed the deal to buy Twitter on October 27, 2022.
Running up the legal tab on Twitter?
Essentially, Musk’s lawyers argue that Wachtell pulled a fast one on Twitter — and that its outgoing executives were more than happy to fold, handing out millions to Wachtell and saddle the company, which will soon be under Musk’s ownership, with a big legal bill .
Wachtell, the complaint alleges, was “at the center of a spending spree by Twitter’s outgoing executives that ran up on Twitter by, among other things, facilitating the improper payment of substantial gifts to preferred law firms like Wachtell on top of the firms’ full hourly pay by appointing tens of thousands of million 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 woes mount
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 embattled crypto company Binance.
Twitter owes now 1 billion dollars annually to service its debt. To offset these bills, Musk laid off most of Twitter’s employeespaywalled many of Twitter features as part of a $8 a month Twitter Blue subscription, and started charge developers to access Twitter’s API at the usage levels it used to offer for free.
Musk has invented creative ways to save pennies – for example, by denying laid-off employees proper resignation and by refusing to pay the company’s rent in its various offices.
But a $90 million legal bill is still a heavy lift for a vanity owner who has spent more time writing transphobic memes on his website than balancing his company checkbook. It all leaves him with a pressing concern: looking for any financial break he can get.