CEO Elon Musk said late Friday that Musk has a new reason to cancel his merger agreement with
In a letter to Twitter (ticker: TWTR), lawyers wrote that the social media company’s recent payments to a former employee, Petyr Zatko, violate the merger agreement.
Musk has already sent previous letters claiming the deal was off, a dispute that will be heard in a Delaware court in October.
Now Musk’s lawyers say they have another reason to cancel the deal.
The letter said the compensation for Zatko, totaling $7.5 million, violates a portion of the merger agreement that prohibits certain severance and compensation payments between “signing and closing” of the deal.
“This indemnity violated Section 6.1(e) and cannot be remedied,” Musk’s lawyers wrote.
A Securities and Exchange Commission document containing the letter said the severance serves as a “separate and separate” basis for terminating the merger.
“Because Twitter has taken the position that the Merger Agreement remains in effect, the Musk parties are providing this additional notice to terminate the Merger Agreement,” the letter states.
Twitter did not immediately respond to a request for comment.
Zatko, Twitter’s former security chief, has become a key player in the ongoing battle between Musk and Twitter after he filed a wrongdoing complaint with the SEC, alleging that Twitter misled regulators and the company’s board about security vulnerabilities and its efforts to fight against spam.
A judge in the Delaware Chancery recently ruled that Musk could include the complaint in his counterclaim against Twitter, which seeks to end the deal. The court denied Musk’s request to delay the trial from October to November.
Shares of Twitter were down 1.1% in late trading Friday evening.
Write to Alex Eule at [email protected]