Elon Musk moved to end Twitter’s lawsuit against him on Thursday, asking a judge to halt the trial that was set to begin in little more than a week and would determine the fate of the social media company. Twitter opposed the motion, arguing that the trial should proceed unless Mr. Musk completes his purchase of the company.
Mr. Musk said in a legal filing that he was working to arrange financing for the deal, a process that would take several weeks. His acquisition of Twitter would close by Oct. 28, he told the court.
Mr. Musk made his request as Twitter board members discussed his latest offer to buy the company on Thursday morning, as negotiations over the sale of Twitter dragged into their third day. A judge’s approval is required in order to halt the litigation and a ruling could come as soon as Thursday evening.
Lawyers for Mr. Musk accused Twitter of bogging down the process by insisting that the lawsuit continue, while Twitter said the attempt to halt the litigation was “an invitation to further mischief and delay.”
“Twitter will not take yes for an answer. Astonishingly, they have insisted on proceeding with this litigation, recklessly putting the deal at risk and gambling with their stockholders’ interests,” attorneys for Mr. Musk wrote in a legal filing. “Proceeding toward trial is not only an enormous waste of party and judicial resources, it will undermine the ability of the parties to close the transaction.”
Twitter is set to face Mr. Musk in court on Oct. 17 for a trial that could force the billionaire to buy the company. But on Monday, Mr. Musk delivered a surprise letter to Twitter declaring he would pay $44 billion for the company, as he agreed to do in April before changing his mind and declaring he would quit the deal.
Mr. Musk’s fresh proposal has left Twitter’s board juggling two high-stakes negotiations: one over the legal battle, and the other about a potential agreement to sell the company that would avert the courtroom drama.
What Happened to Elon Musk’s Twitter Deal
A blockbuster deal. In April, Elon Musk made an unsolicited bid worth more than $40 billion for the social network, saying he wanted to make Twitter a private company and allow people to speak more freely on the service.
Twitter plans to proceed with its litigation against Mr. Musk until a deal is certain, two people with knowledge of the confidential discussions said. The board’s transaction committee, which includes the technology executives Bret Taylor, Martha Lane Fox and Patrick Pichette, has met weekly with legal and financial advisers to manage the deal-making.
Closing such a deal would normally be a mundane event, with the two sides exchanging the legal documents necessary to transfer ownership of a company. But Mr. Musk’s volatile business dealings have made Twitter hesitant to abandon its lawsuit until Mr. Musk takes ownership of the company and his funds are delivered to Twitter shareholders, the people said.
Lawyers for Twitter said in a legal filing that Mr. Musk had refused to commit to a closing date for the transaction. But Mr. Musk’s attorneys argued that clinging to the lawsuit would jeopardize the deal and that the banks who had agreed to fund Mr. Musk’s bid for Twitter were prepared to honor their commitments.
On Thursday, Mr. Musk suggested that he had reluctantly been coaxed to the negotiation table, tweeting a scene from “The Godfather, Part III” that included the line, “Just when I thought I was out, they pull me back in.”
In recent weeks, Mr. Musk proposed buying Twitter at a significant discount of as much as 30 percent. Discussions later narrowed to around 10 percent, people familiar with those conversations said.
Twitter appeared willing to negotiate on the price for the social media company, said Alex Spiro, a lawyer representing Mr. Musk.
“Twitter offered Mr. Musk billions off the transaction price. Mr. Musk refused because Twitter attempted to put certain self-serving conditions on the deal,” Mr. Spiro said, without adding more details. A Twitter spokesman did not immediately respond to a request for comment on his claim.
On Monday, after those conversations had fizzled, Mr. Musk informed the company that he was ready to proceed with the original price he had offered in April.
Despite Mr. Musk’s motion to stop it, Twitter’s lawsuit against him may continue, legal experts said.
Ann Lipton, a professor of corporate governance at Tulane Law School, said a judge in Delaware Chancery Court, where the trial is set to be held, was likely to reject Mr. Musk’s request. She said that allowing him to halt the trial would effectively decide that Twitter’s claims against Mr. Musk were without merit, something for which “there’s a formal process.”
Debt financing has remained a focal point in negotiations. If Mr. Musk’s debt financing falls through, he can pay a $1 billion breakup fee to Twitter and walk away from the acquisition.
A group of lenders, led by Morgan Stanley, Bank of America and Barclays, have committed to providing $12.5 billion to Mr. Musk’s bid. The banks are on the hook for that debt through next year. Fully prepared debt commitment letters from those are required to finalize the deal.
Investment banks typically sell the debt they arrange for such loans to reduce their risks in case borrowers cannot repay what is owed, a process that takes months. Doing so now might be painful for the banks, since economic uncertainty has dented investors’ interest and forced banks to sell such loans at a loss.
A corporate representative for one of the banks testified on Thursday that Mr. Musk had not communicated to the bank that he plans to close the transaction, Twitter said in a legal filing. The filing did not identify the banking official or indicate where they testified. Twitter has accused Mr. Musk in its lawsuit of not taking reasonable efforts to secure the debt financing for the deal, which would put him at breach of their contract.
The remaining funds for the $44 billion deal are set to come from Mr. Musk’s personal wealth and equity investors. Mr. Musk has sold about $15.5 billion in Tesla stock to amass the cash needed to buy Twitter.
In the spring, he said he had raised $7.1 billion from equity investors, including the top venture capital firms Andreessen Horowitz and Sequoia Capital, and his personal confidants, including the tech mogul Larry Ellison.
It is unclear whether the terms of their agreement with Mr. Musk allow them to back out given the changed circumstances. Representatives of Andreessen Horowitz and Oracle, the company that Mr. Ellison chairs, did not respond to requests for comment.
A spokeswoman for Binance, the cryptocurrency exchange that committed $500 million, said nothing had changed about the company’s plans to participate in the deal.
The deal-making continues under the shadow of Twitter’s lawsuit, which is set for an Oct. 17 trial. If the company cannot reach an agreement with Mr. Musk before then, it is set for an incendiary showdown in the Delaware Court of Chancery, which specializes in managing deal disputes and could order Mr. Musk to buy Twitter. If it proceeds, the trial could feature testimony from Mr. Musk and top Twitter executives.
A deposition scheduled for Thursday with the billionaire was canceled as negotiations continued, two people familiar with the matter said. It has been rescheduled for Monday, a person with knowledge of the plans said.
“Trial is fast approaching,” Kathaleen McCormick, the judge overseeing the litigation, wrote in a letter on Thursday to lawyers for Twitter and Mr. Musk. The letter urged the legal teams to quickly resolve their disputes over discovery and prepare for the trial.
Katie Benner and Michael S. Schmidt contributed reporting.
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