Musk pushes Twitter back, falls on Wall Street and gets himself into a legal battle – 12/07/2022 00:05


Analysts said slowing economic growth is expected to “significantly affect ad revenue” from Twitter (AFP/Olivier Dollere)

Twitter was dealt a heavy blow on Wall Street Monday by Elon Musk’s abandonment of his plan to buy the social network, a “null and unjustified” decision according to the platform that requires the billionaire to honor his commitments.

The company’s title fell 11.3% on the New York Stock Exchange to end at $32.65, 40% less than what the entrepreneur offered when he announced his intention to take it on Twitter in mid-April.

But after several months of procrastination and somewhat outright threats, Mr. Musk said in a message to Twitter on Friday that he had terminated that agreement.

It is believed that the company failed to meet its obligations by not disclosing enough information about fake accounts and spam and reducing their number.

To justify his abdication, Mr. Musk also cites several recent decisions taken by Twitter such as a hiring freeze, contrary to his commitment to the company to continue operating as normal.

Wrong, Twitter’s lawyers formally responded in a letter sent on Sunday to Mr. Musk and his legal representatives, and published Monday evening on the website of the US Financial Markets Authority.

“Contrary to the assertions in your message, Twitter has not breached any of the obligations under the Agreement,” they wrote.

So the social network demands that the billionaire fulfill his obligations.

Twitter in particular claims to have sent the information Mr Musk requested about the number of non-original accounts on its platform, which it claims is less than 5% while the billionaire estimates it is much higher.

Many specialists argue that the reasons given by the entrepreneur do not legally justify breach of contract.

Consequently, the two camps are now locked in a legal dispute that could cost Mr. Musk several billion dollars if he loses.

– Reputational risk –

Earlier in the day, Mr. Musk shared his first reaction on Twitter on Monday since announcing his withdrawal by posting a photo containing four photos of him looking hilarious.

Entrepreneur Elon Musk in Vancouver, Canada on April 14, 2022 (TED Conferences, LLC/Ryan Lash)

Entrepreneur Elon Musk in Vancouver, Canada on April 14, 2022 (TED Conferences, LLC/Ryan Lash)

“They said I can’t buy Twitter. Then they refused to reveal the fake account information. Now they want to force me to buy Twitter in court. Now they have to reveal fake account information,” can we read next to each shot.

Soon after he posted a photo of actor Chuck Norris winning at chess, accompanied simply by the phrase “Chuckmate”, a pun on “checkmate” and the actor’s name.

Dan Ives of Wedbush Securities said: ‚ÄúThis is a ‘very dangerous’ situation for Twitter and its board as the company engages in a Game of Thrones-style legal battle to salvage the deal. Or recover at least $1 billion in severance payments.”

“We don’t see any other exhibitors standing at the moment, while legal proceedings will begin in court,” the analyst adds.

However, Morningstar analyst Ali Al Maghribi believes that at the level the stock is currently trading, “other parties may be interested in Twitter.” There is still a scenario in which Elon Musk ends up buying the set, but at a renegotiated lower price, he adds in a note.

Without moving ahead with the outcome of the legal battle, analysts from the rating agency S&P Global Ratings note that in any case, this “increases uncertainty and reputational risks” for the platform.

The slowdown in economic growth was expected to have a “significant impact on ad revenue” from Twitter, which makes up about 90% of its sales, they say.

They plan to lower Twitter’s rating by one notch or more if the transaction is confirmed at the original price or if it is cancelled. On the other hand, they can decide to leave it at its current level if the two parties reach an agreement and the reputation of the social network, both with its users and advertisers, has not been damaged too much.

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