A Delaware judge halted a court case against Tesla chief executive Elon Musk over his proposed $44 billion purchase of Twitter, giving the parties more time to complete the deal.
Delaware Chancery Judge Kathaleen McCormick said if the transaction was not done by 5pm local time on October 28, she would set new trial dates in November, according to an order issued Thursday.
The ruling hands a partial victory to Mr Musk, who earlier in the day had asked the judge to pause Twitter’s lawsuit against him before an October 17 trial date.
But it also gives the billionaire a deadline by which he needs to make good on his April agreement to pay $54.20 a share — an obligation he previously tried to abandon.
Shares in San Francisco-based Twitter rose by as much as 3.5 per cent in late trading after the judge’s ruling, a sign of optimism that the order gives Twitter some of the certainty it was seeking.
Acrimony between the parties escalated Thursday, with both sides trading barbs in court filings.
Mr Musk requested a pause in the hearing, saying the social media company “will not take yes for an answer” after he proposed closing the buyout in an October 3 letter. His lawyers focused on an October 28 closing.
Twitter had objected to the request, saying Mr Musk “can and should” close the deal next week.
Talks between the two sides had snagged after Mr Musk said that his offer was now contingent on receiving $13 billion in debt financing. The original deal didn’t contain such a contingency.
Mr Musk said Twitter was resisting the move to halt court proceedings based on the “theoretical possibility of a future failure to obtain the debt financing.”
After the judge’s ruling, Twitter general counsel Sean Edgett sent an update to staffers, saying the company would not be going to court on October 17 and would work to close the deal by October 28 as ordered by the judge.
“Our intention remains the same: to close the acquisition at the price and terms in the original merger agreement,” Mr Edgett wrote in the memo reviewed by Bloomberg.
“Thank you to all of the teams working hard to navigate these twists and turns.”
Within hours of Ms McCormick’s order, Mr Musk began tweeting about his plans for Twitter.
“There will be very rapid product evolution,” he wrote in response to another user’s query.
“Software engineering, server operations & design will rule the roost,” he continued in another post.
In their filing earlier Thursday, Mr Musk’s lawyers had argued that a short pause would not harm Twitter.
“In the event a closing does not occur, the litigation can promptly resume based on the then existing facts and whatever issues remain at the time.”
But going ahead with the scheduled October 17 trial, and the appeals that would follow, would have caused the deal to take “months” to complete, Mr Musk’s lawyers said.
Twitter said it was sceptical of Mr Musk’s promises and said that a banker involved in the debt financing said earlier on Thursday that Mr Musk had yet to send them a borrowing notice, and had otherwise not communicated to them that he intended to close the deal.
The banker also said that “the main task necessary to close the deal — memorialising the debt financing — could have happened in July but did not because Mr Musk purported to terminate the deal.”
“Now, on the eve of trial, defendants declare they intend to close after all,” Twitter said in its filing.
“‘Trust us,’ they say, ‘we mean it this time,’ and so they ask to be relieved from a reckoning on the merits.”
Mr Musk’s proposed stay “is an invitation to further mischief and delay,” the microblogging platform said. “Until defendants commit to close as required, Twitter is entitled to its day in court.”
The two parties had been gearing up for the week-long courtroom battle, which would have determined whether the billionaire had legitimate grounds to torpedo the buyout because of alleged fake user accounts.
Ms McCormick ruled against the Tesla chief executive on about half a dozen pre-trial issues that could have foreshadowed difficulties in making his case in court.
Seven banks, led by Morgan Stanley, fully underwrote the debt portion of the financing, according to an April filing.
As is usual in this type of contract, banks originally planned to sell most of that debt to institutional money managers before the Twitter deal closed, but they have always been on the hook for providing the funding if anything went wrong.
There are very few, if any, ways for banks to get out of providing such debt commitments after signing the contract.
And most banks wouldn’t want to, even if it meant preventing a loss, because backing out would reflect poorly on their investment banking business and could harm their ability to win new deals with companies and private equity firms in the future.
A representative for Morgan Stanley declined to comment about the deal.
Bloomberg reported earlier that, as part of the talks with Twitter, Mr Musk had also been seeking to reserve his rights to file a fraud suit over his claims the platform’s executives misled him and other investors about the number of spam and robot accounts among its more than 230 million users.
Alex Spiro, one of Mr Musk's lawyers, said Twitter had offered to take “billions” off its sale price in exchange for “self-serving conditions” that his client refused.
Twitter has not replied to a request for comment on Mr Spiro’s statement or the deal conditions it is seeking.