I don't think Twitter has much of a choice here. Suing Musk seems like a pretty big risk given his defense, and it doesn't even guarantee a payoff for the company. On top of that, the fallout from such a high-profile court case wouldn't be very good PR (arguably so even if Twitter wins), so the shareholders are probably in for a net loss if they fight it out in court. Plus, Elon could full-well just settle the $1B offer cancellation fee out of spite and Twitter wouldn't see a dime.
Elon definitely made a stupid and rash decision, but frankly, Twitter is an even dumber company. A bunch of bagholders trying to legally compel a multi-billionaire to buy them out doesn't make a very strong court case. I don't see this ending well for Twitter unless Elon really fumbles his defense.