Judge Grants Elon Musk’s Request to Delay Trial With Twitter

Elon Musk’s surprise return to the bargaining table with Twitter this week may have merely been the opening salvo in the next stage of the protracted struggle over the future of the company.

On Thursday, Mr. Musk managed to slow Twitter’s lawsuit against him. He asked a judge to delay a trial that was set to begin in little more than a week and that could force him to make good on a deal he struck in April to acquire the company for $44 billion.

Kathaleen McCormick, the judge overseeing the case, granted Mr. Musk’s request, giving the billionaire three weeks to complete his purchase of Twitter.

The trial’s delay is the latest upheaval in what has become the most turbulent and closely watched corporate fight in years, pitting the outsize personality and wealth of Mr. Musk against Twitter, a company that despite its high profile has always struggled with management turmoil and profitability.

The decision gives Mr. Musk more time to settle his financing, which may have become more difficult since his initial offer because of inflation and the slowing economy. Mr. Musk said in a legal filing that the process would take several weeks and that he could get it done by Oct. 28. If the transaction does not close by then, the judge said, a trial will be scheduled in November.

Twitter had opposed the motion, arguing that Mr. Musk did not appear to be serious about lining up his financing and that the trial should proceed unless he quickly makes good on his latest offer of $54.20 per share.

“We look forward to closing the transaction at $54.20 by Oct. 28,” a Twitter spokesman said on Thursday evening.

Mr. Musk asked for a delay as Twitter board members discussed his offer and negotiations dragged into their third day.

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,” lawyers for Mr. Musk wrote in a legal filing. “Astonishingly, they have insisted on proceeding with this litigation, recklessly putting the deal at risk and gambling with their stockholders’ interests. 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 had been set to face Mr. Musk in court on Oct. 17. But on Monday, he delivered a surprise letter to Twitter declaring that 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 left Twitter’s board juggling two high-stakes negotiations: one over the legal battle and the other about a potential agreement that would avert the courtroom drama.

Twitter plans to proceed with its litigation 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 necessary legal documents. But Mr. Musk’s volatile business dealings have made Twitter hesitant to abandon its lawsuit until he takes ownership 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. But his lawyers argued that clinging to the lawsuit would jeopardize the deal and that the banks that 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 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, 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 declined to respond to a request for comment on the claim.

On Monday, after those conversations had fizzled, Mr. Musk informed the company that he was ready to proceed with the original price he offered in April.

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, has committed to providing $12.5 billion. The banks are on the hook for that debt through next year. Fully prepared debt commitment letters from those banks are required to complete 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 may 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 planned to close the transaction, Twitter said in a legal filing. The filing did not identify the banking official or indicate where the official testified. Twitter has accused Mr. Musk in its lawsuit of not making reasonable efforts to secure the debt financing, which would put him in 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, the chief executive of Tesla, has sold about $15.5 billion in the electric carmaker 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 allow them to back out given the changed circumstances. Representatives of Andreessen Horowitz and Oracle, the company that Mr. Ellison leads, 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 could proceed in November if a deal is not reached. If a trial occurs, the incendiary showdown in the Delaware Court of Chancery, which specializes in managing deal disputes, could feature testimony from Mr. Musk and top Twitter executives.

A deposition scheduled for Thursday with Mr. Musk 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, although Mr. Musk’s on-the-record sit-down has been rescheduled twice and could be moved again because of the trial postponement.

Katie Benner and Michael S. Schmidt contributed reporting.