Twitter is embroiled in a legal tussle over the hefty fees related to Elon Musk's $44 billion acquisition of the platform. The social media giant's parent company, X Corp., filed a lawsuit against the prominent Wall Street law firm, Wachtell, Lipton, Rosen & Katz. The suit claims a $90 million payment made to the firm was "unjust enrichment" and demands its return.
The lawsuit, lodged in San Francisco Superior Court, alleges that Wachtell Lipton extracted the significant fee "from the company cash register while the keys were being handed over" to Musk, the owner of X Corp. The legal firm was initially hired by Twitter's earlier management when Musk attempted to terminate his acquisition agreement. Despite his efforts, the acquisition was finalized in October of the previous year.
It's worth noting that Twitter has been challenging multiple fees in relation to Musk's acquisition. Earlier, advisory firm Innisfree M&A and PR firm Joele Frank also filed lawsuits against Twitter, claiming unpaid bills and services.
Wachtell Lipton's reputation precedes it, known for advising top-tier deals, including Musk's unsuccessful bid to privatize Tesla in 2018. Their expertise comes at a premium, placing them among the top-earning law firms. This isn't the firm's first brush with legal challenges. They were sued in 2018 by investor Carl Icahn over their involvement in his 2012 takeover bid for CVR Energy, although that suit was eventually dismissed.
The lawsuit's documents highlight that Twitter's leadership approved the $90 million payment, crediting Wachtell Lipton and attorney William Savitt for ensuring Musk honored his acquisition agreement. The suit alleges that this approval was a breach of fiduciary duty by the former Twitter board and executives. They purportedly hurried the deal with Musk without due diligence or adequate information. Shockingly, a large portion of the $90 million fee was transferred to Wachtell Lipton just minutes before the acquisition was sealed. Soon after this, Musk made swift executive changes at Twitter, ousting key players, including the chief legal officer.
While the $90 million fee might seem exorbitant, it's essential to frame it in perspective. When Wachtell was brought on board, Twitter's market valuation was at a $14 billion deficit compared to what Musk had committed to paying. By ensuring Musk's full payment, the law firm effectively boosted Twitter shareholders' value by $14 billion. The contentious fee is roughly 0.6% of this increased value.
The saga underscores the vast sums involved in high-profile acquisitions and the perceived value of elite legal counsel in navigating such deals.
For an engaging and in-depth overview of this latest chapter in the Elon Musk - Twitter sage, see this video by LegalEagle.
