It is possible that Elon Musk’s attempt toEnding his Twitter acquisition To a legal battle that needs a long breath, and may leave behind a decline in the company’s share price, which will lead Twitter to a new level of chaos following months of disputes that damaged its reputation and employee morale.
“This was a worst-case scenario for Twitter, and now it has happened,” Dan Ives, managing director and senior equity research analyst covering the technology sector at Wedbush Securities, told The Washington Post.
Ives warned that Musk’s attempt to pull out might make the company look like a “bad commodity” to other investors or potential acquirers.
Twitter shares are down regarding 6% in following-hours trading on Friday. Wedbush Securities expects the stock to fall to between $25 and $30 when the market reopens Monday, down more than 30% from its closing level on Friday followingnoon before Musk announced his withdrawal.
In a press release issued Friday evening, Twitter’s board threatened to “follow up on legal action” to enforce the terms of the $44 billion deal that Musk struck in April to buy the social network private and make it a private company.
Musk is required to move forward with the purchase, unless there is a significant change in the company’s business, which legal experts say is difficult to prove.
turbulent period
Twitter’s board said it was confident the company would win the case, but analysts warn that Musk’s move sets the stage for a turbulent period, which might bring new financial risks for the company and its employees.
The American billionaire has been threatening to walk away from the deal for weeks, but Friday’s announcement opens a new frontier in the acquisition of the social network, which wields significant influence over news coverage and politics.
Musk’s lawyers have repeatedly accused Twitter of failing to hand over data to help his team confirm the number of fake or spam accounts on the social network. At the same time, the company asserts that it has complied with all the terms of its agreement and handed over its data, a massive influx of more than 500 million tweets posted each day.
Legal experts also say Musk’s case falls short of allowing him to drop the deal. But even if Twitter succeeds in recovering the $1 billion deal breakup fee, the trial battle invites new challenges.
Donna Hitscherich, a professor at Columbia Business School, said Musk’s move “will naturally raise questions regarding why he lost interest,” according to the Washington Post.
The deal angered several Twitter employees, who said negotiations with Musk brought intense scrutiny on the company. Any dip in its stock would affect their compensation, adding to the discontent of those who were greatly concerned regarding the prospect of the world’s richest man taking over the company they work for.
Since Musk announced the deal, Twitter has frozen hiring and replacing key executives.
A first step back
Musk started complaining regarding the fake accounts problem shortly following he agreed to the purchase. In a tweet in May, he said the deal was “on hold” and insisted that the acquisition might not “move forward” until Twitter provided further evidence of its methods for detecting fake accounts.
Musk committed to using more than $33 billion of his private wealth, which comes largely from his ownership in Tesla, to complete the deal. But with the stock market turmoil due to a global sell-off in technology shares, Tesla’s stock has plummeted, and Twitter’s stock has fallen 30% since Musk announced the deal, when it was trading at $52.
