Musk Blinks: X Settles $128 Million Lawsuit With Former Twitter Executives Parag Agrawal and Vijaya Gadde

Elon Musk and X Corp have reached a settlement with four former top Twitter executives who claimed they were denied $128 million in severance pay after Musk acquired the social media company in 2022 and immediately fired them, according to a court filing last week.

The executives—former CEO Parag Agrawal, former CFO Ned Segal, former chief legal officer Vijaya Gadde, and former general counsel Sean Edgett—had sued Musk, alleging he falsely accused them of misconduct and forced them out as retribution for their role in holding him to his $44 billion purchase commitment when he tried to back out of the deal.

The terms of the settlement, announced in a filing in San Francisco federal court, were not disclosed. Neither X nor lawyers for the former executives responded to requests for comment, according to multiple reports.

A First-Day Firing With Lasting Consequences

The lawsuit centered on events from October 27, 2022—the day Musk officially took control of Twitter. Within hours of closing the $44 billion acquisition, Musk fired the four executives who had led the company through the tumultuous months when the billionaire attempted to walk away from his purchase agreement.

According to the lawsuit referenced by The Guardian, the former executives alleged that Musk falsely accused them of misconduct and forced them out after they successfully sued him for attempting to renege on his offer to buy the company. The executives had played key roles in the Delaware Chancery Court case that ultimately compelled Musk to complete the purchase.

The executives claimed they were each owed one year’s salary and hundreds of thousands of dollars’ worth of stock options—severance packages that had been promised for years before Musk acquired Twitter. Musk and X denied wrongdoing throughout the litigation, arguing the executives were fired over their performance.

The Broader Pattern of Unpaid Severance

The settlement with the former executives represents just one front in Musk’s ongoing legal battles over compensation for people he terminated after acquiring Twitter. In August, X agreed to settle a separate lawsuit by rank-and-file Twitter employees who lost their jobs during mass layoffs and claimed they were owed $500 million in unpaid severance, according to CNBC, HuffPost, and multiple other outlets.

Elon Musk’s X has reached a tentative settlement with former employees of the company then known as Twitter who’d sued for $500 million in severance pay, Fortune reported in August. The parties disclosed the deal in a court filing asking for a scheduled September 17 hearing to be postponed.

Musk’s social media company X Corp reached a tentative agreement to settle a lawsuit filed by former Twitter employees who said they were owed $500 million in severance pay, CNN reported in August. The class-action lawsuit involved about 6,000 laid-off employees, according to Bloomberg Law.

Musk’s social media company X Corp reached a tentative agreement to settle a lawsuit filed by former Twitter employees who said they were owed $500 million in severance pay, CNN reported in August.

These cases are among a series of legal challenges that Musk, the world’s richest person, has faced after he acquired Twitter for $44 billion in 2022, cut more than half of its workforce and renamed it X, according to CNBC.

Why the Executives Weren’t Paid

The four executives never received severance payments, which they claimed was because they tried to hold Musk to his $44 billion commitment when he tried to back out of buying the company, according to TechCrunch.

This allegation goes to the heart of the dispute. In the spring and summer of 2022, after signing the agreement to purchase Twitter, Musk attempted to terminate the deal, citing concerns about bot accounts and the company’s disclosures. Twitter’s board and executive team, led by Agrawal, sued Musk in Delaware Chancery Court to enforce the merger agreement.

That legal battle ultimately forced Musk to complete the acquisition on the original terms. The executives’ lawsuit alleged that Musk’s refusal to pay their severance was retaliation for their role in compelling him to close the deal—a deal he clearly no longer wanted and has since described as overpaying for the company.

By characterizing their termination as “for cause” based on alleged misconduct or poor performance, Musk could potentially avoid paying the substantial severance packages the executives had negotiated. The lawsuit challenged both the factual basis for the misconduct allegations and the legal justification for denying severance.

The Mass Layoffs and Their Aftermath

The firing of the four top executives was only the beginning. After taking control of Twitter, Musk implemented massive layoffs that reduced the company’s workforce by more than half. These cuts sparked numerous legal challenges from terminated employees who claimed they were denied proper severance, notice, or compensation.

The August settlement involving rank-and-file employees represented one of the largest of these disputes, with about 6,000 former employees claiming they were owed $500 million in unpaid severance. Like the executives’ case, that dispute centered on whether Musk and X Corp lived up to the severance obligations that Twitter had promised employees before the acquisition.

The pattern across both cases—executives and regular employees alike—suggests a systematic approach to minimizing costs associated with the acquisition by denying or reducing severance payments wherever possible.

The $44 Billion Question

Musk’s acquisition of Twitter has proven extraordinarily costly, both in terms of the purchase price and the ongoing legal and operational challenges. The billionaire has repeatedly suggested he overpaid for the company, and his attempts to cut costs have been aggressive and, in many cases, controversial.

Beyond the severance disputes, Musk has faced lawsuits over unpaid rent for Twitter’s offices, unpaid bills to vendors and contractors, and various employment-related claims. The company’s advertising revenue declined sharply after the acquisition as major brands pulled spending amid concerns about content moderation changes and the platform’s direction under Musk’s ownership.

The decision to settle both the executives’ lawsuit and the rank-and-file employees’ class action suggests that, despite Musk’s combative public persona and his history of fighting legal battles aggressively, the company ultimately determined that settling was preferable to the risk, cost, and distraction of continued litigation.

Implications of the Settlement

While the settlement terms remain confidential, the decision to settle rather than continue fighting suggests several possibilities. X and Musk may have concluded that their legal position was weaker than they initially believed, that the costs of continued litigation outweighed the potential savings from prevailing, or that the public relations impact of the disputes was damaging to the company’s efforts to stabilize and grow.

For the former executives, the settlement presumably provides at least some of the compensation they claimed they were owed, though whether it represents the full $128 million they sought or some lesser amount remains unknown.

The August settlement with rank-and-file employees similarly leaves questions about whether the approximately 6,000 former workers will receive the full $500 million they claimed or a negotiated lesser sum.

A Pattern of Post-Acquisition Disputes

The severance disputes represent just one category of legal challenges arising from Musk’s Twitter acquisition. The billionaire has faced criticism and legal action on multiple fronts:

• Employment discrimination claims related to the mass layoffs
• Allegations of failing to pay vendors and contractors
• Disputes over unpaid rent for office spaces
• Concerns about compliance with consent decrees related to user privacy
• Securities-related investigations into his disclosure practices before and during the acquisition

Taken together, these disputes paint a picture of an acquisition that was contentious from the start and has remained mired in legal complications more than two years after it closed.

Musk’s approach to the Twitter acquisition and its aftermath has become a case study in how not to handle a major corporate takeover. While his stated goals included improving free speech on the platform and making it financially sustainable, the execution has been marked by controversy, legal battles, and significant financial losses.

The company’s value has reportedly declined substantially from the $44 billion Musk paid. Advertising revenue, Twitter’s primary income source, fell sharply as major brands fled the platform. Musk’s attempts to generate revenue through paid verification and other subscription features have had mixed results.

Against this backdrop, the ongoing legal disputes over severance and other post-acquisition obligations represent both a financial drain and a distraction from Musk’s efforts to transform the platform into what he has rebranded as X, envisioned as an “everything app.”

With both major severance disputes now settled or in the process of being finalized, X can potentially move forward without these particular legal clouds hanging over it. However, numerous other legal challenges remain, and new disputes could emerge as the company continues to navigate its post-Musk acquisition reality.

For the former executives and employees who pursued these cases, the settlements represent a measure of vindication and compensation, even if the terms remain confidential. Their willingness to sue one of the world’s richest and most litigious individuals, and to see those cases through to settlement, may influence how other companies and executives approach severance obligations during acquisitions.

As X continues its transformation under Musk’s ownership, the settlement of the $128 million executives’ lawsuit and the $500 million rank-and-file employees’ case mark the end of one contentious chapter—though many others remain unresolved.

This story was aggregated by AI from several news reports and edited by American Kahani’s News Desk.