Shares of Twitter fell more than 7% Monday morning after billionaire Elon Musk said that he was abandoning his $44 billion bid for the company and the social media platform then vowed to challenge Musk in court to uphold the agreement.
Muskon Friday, claiming that Twitter refused to provide enough information about the number of fake accounts it has and that Musk’s advisors determined the true incidence of bots on the platform is “wildly higher” than Twitter claims.
However, Twitter said last month that it was making available to Musk a “firehose” of raw data on hundreds of millions of daily tweets when he repeatedly raised the issue. Twitter has said for years in regulatory filings that it believes about 5% of the accounts on the platform are fake but on Monday Musk continued to taunt the company, using Twitter, over what he has described as stonewalling.
Musk agreed to a $1 billion break-up fee as part of the buyout agreement, though it appears Twitter CEO Parag Agrawal and the company are settling in for a legal fight to force the sale.
Both sides have lawyered up, according to Bloomberg. The outlet reported that Twitter has hired powerhouse law firm Wachtell, Lipton, Rosen & Katz and aims to file suit this week. Musk, for his part, has hired Quinn Emanuel Urquhart & Sullivan, according to Bloomberg, the law firm that is representing him against a shareholder lawsuit over taking Tesla private in 2018.
“For Twitter this fiasco is a nightmare scenario and will result in an Everest-like uphill climb for Parag & Co. to navigate the myriad of challenges ahead around employee turnover/morale, advertising headwinds, investor credibility around the fake account/bot issues, and host of other issues abound,” Wedbush analyst Dan Ives, who follows the company, wrote Monday.
The sell-off in Twitter shares pushed prices below $35 each, far from the $54.20 that Musk agreed to pay for the company. That suggests, strongly, that Wall Street has serious doubts that the deal will go forward.
“This is going to be a long and ugly court battle (Twitter has already hired counsel) ahead in which the fake account/bot issue will be scrutinized for all to see and casts a dark cloud over Twitter’s head in the near term,” Ives said.
“A messy divorce would be an improvement on this situation,” Ives told CBS News.