Elon Musk hasn’t made life any simpler for Twitter after burdening it with debt through his leveraged buyout last year. Since then, he’s engaged in legal battles with landlords, vendors and consultants claiming their services have gone unpaid; and now wants to recoup millions in legal fees paid out before his acquisition.
According to a lawsuit filed this week by X Corp, which owns Twitter, Wachtell, Lipton, Rosen & Katz took advantage of X Corp’s transition period when ownership was being transferred from them to Elon Musk and accrued a $90 million fee for their work. According to the complaint filed against Wachtell “arranged to secure funds from company cash register while keys were being given over.”
The lawsuit alleges that Wachtell charged hourly for its services until it successfully secured an agreement with Twitter’s former owners that allowed it to play an integral role in closing its transaction. At that point, it allegedly levied an enormous “success fee,” which the lawsuit describes as being “unconscionable” given how long Wachtell had only worked on the Delaware case.
The lawsuit filed by X Corp against Wachtell seeks to recover “any associated excess fee payments and related litigation costs”, though Wachtell has yet to respond to it. Also named in the complaint are former Twitter directors Martha Lane Fox and Vijaya Gadde as well as general counsel Sean Edgett as defendants.
Wachtell did not immediately respond to our requests for comment, nor have they been named in any other suits against Twitter; yet according to this suit filed against Wachtell it seems clear that Twitter still faces financial difficulty.
Twitter has been reported as losing tens of millions each quarter as it struggles to meet the demands of an aging user base and maintain its status as a global news source. As such, costs have been cut across various areas including layoffs and features reduction. Recently it rolled out an $8 monthly Twitter Blue subscription service as well as charging developers access levels it once provided for free.
Elon Musk Sues Law Firm Wachtell to Recover Fees From Twitter Buyout
This lawsuit represents a major setback for Twitter, which has experienced declining revenues and user growth since their purchase by Elon. Followed by significant layoffs, Twitter has decided to limit users who don’t pay for its service to 140 characters per tweet and implemented Threads as a new initiative offering limited features of Twitter to users who opt-in. Twitter is currently struggling financially after Musk loaded it with $12.5 billion in debt during his leveraged buyout of the social media platform, leaving more than $1 billion annually owed in service payments on that debt. Yet despite these challenges, Twitter remains one of the world’s most beloved and popular social networks.