Looming Musk-Twitter legal battle hammers social media company’s stock
Shares of Twitter fell more than 6% at the opening bell on Monday after billionaire Elon Musk said he was dropping his $44 billion bid for the company and the social media platform s was committed to challenging Musk in court to enforce the deal.
Musk alleged on Friday that Twitter failed to provide enough information about the number of fake accounts it has. However, Twitter said last month it was providing Musk with a “firehose of raw data on hundreds of millions of daily tweets when he raised the issue again after announcing he would buy the social media platform.
Twitter has said for years in regulatory filings that it believes about 5% of accounts on the platform are fake, but on Monday Musk continued to taunt the company, using Twitter, over what he described as a lack of data.
Musk agreed to a $1 billion severance fee as part of the takeover deal, although it appears Twitter CEO Parag Agrawal and company are preparing for a legal battle to force the sale.
For Twitter, this fiasco is a nightmare scenario and will result in an Everest-like climb for Parag & Co to meet the myriad challenges ahead regarding employee turnover/morale, advertising headwinds, credibility investors around fake account/bot issues and host of other issues abound,” Wedbush analyst Dan Ives, who tracks the firm, wrote on Monday.
The sale of Twitter shares pushed prices below $35 each, a far cry from the $54.20 Musk agreed to pay for the company. This strongly suggests that Wall Street seriously doubts the deal will go ahead.
This is going to be a long and ugly court battle (Twitter has already hired a lawyer) ahead in which the fake account/bot issue will be looked at in plain sight and will cast a dark cloud over Twitter’s head in the short term.” Ives said.
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