Shares of Twitter slid more than nine percent on the first day of trading after billionaire Elon Musk said that he was abandoning his US$44 billion bid for the company and the social media platform vowed to challenge Musk in court to uphold the agreement.
Twitter is now preparing to sue Musk in Delaware where the company is incorporated. While the outcome is uncertain, both sides are preparing for a long court battle.
Musk alleged Friday that Twitter has failed to provide enough information about the number of fake accounts on its service.
However, Twitter said last month that it was making available to Musk a “fire hose” of raw data on hundreds of millions of daily tweets when he raised the issue again after announcing that he would buy the social media platform.
Twitter has said for years in regulatory filings that it believes about five percent of the accounts on the platform are fake. But yesterday, Musk continued to taunt the company, using Twitter, over what he has described as a lack of data.
In addition, Musk is also alleging that Twitter broke the acquisition agreement when it fired two top managers and laid off a third of its talent-acquisition team.
Musk agreed to a US$1 billion breakup fee as part of the buyout agreement, although it appears Twitter CEO Parag Agrawal and the company are settling in for a legal fight to force the sale.“For Twitter this fiasco is a nightmare scenario,” Wedbush analyst Dan Ives, who follows the company, wrote yesterday. He said the result would be “an Everest-like uphill climb for Parag & Co.” given concerns over employee morale and retention, advertiser concerns, and other challenges.
The sell-off in Twitter shares pushed the share price below US$34, far from the US$54.20 that Musk agreed to pay for the company. That suggests Wall Street has very serious doubts that the deal will go forward.
Many experts in the legal and business sectors believe Twitter likely has a stronger case.