NEW YORK (AFP) – Twitter shares plunged on Monday (July 11) as billionaire Elon Musk issued a mocking, defiant commentary about a looming court battle after he ditched a US$44 billion (S$61.8 billion) buyout of the social media giant.
Shares of the microblogging platform fell 11.3 per cent to finish at US$32.65, with analysts saying that Mr Musk’s exit places the company in a vulnerable state at a challenging moment for its core business.
After weeks of threats, Mr Musk on Friday pulled the plug on the deal, accusing Twitter of “misleading” statements about the number of fake accounts, according to a letter from his lawyers included in a United States securities filing.
In his first public remarks since the announcement, Mr Musk took to Twitter late on Sunday night to troll the company after it said it would sue to enforce the deal.
“They said I couldn’t buy Twitter. Then they wouldn’t disclose bot info. Now they want to force me to buy Twitter in court. Now they have to disclose bot info in court,” he wrote in a tweet, with each of the four statements accompanied by pictures of Mr Musk laughing with increasing glee.
A second tweet showed an image of martial arts star Chuck Norris behind a chess board, which Mr Musk captioned “Chuckmate”.
Twitter offered a fresh rebuttal of its own late on Monday, releasing a letter from its legal team to Mr Musk’s lawyers that called the Tesla boss’ grounds for ending the deal “invalid and wrongful”, according to a securities filing.
“Twitter demands that Mr Musk and the other Musk parties comply with their obligations under the agreement, including their obligations to use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the agreement,” said Twitter attorneys at Wachtell, Lipton, Rosen & Katz.
The termination of the takeover agreement that Mr Musk inked in April sets the stage for a potentially lengthy court battle with Twitter, which initially opposed a transaction with the unpredictable billionaire entrepreneur.
The original merger agreement contained a US$1 billion break-up fee.
Twitter has defended its fake accounts oversight and said it will sue to force Mr Musk to complete the deal.
The social network says the number of fake accounts is less than 5 per cent, a figure challenged by the multi-billionaire, who believes the percentage to be much higher.
S&P Global Ratings said Mr Musk’s latest move “carries multiple downside risks” for Twitter, pointing to the precariousness of company revenues tied to advertising given rising recession risk.
The ratings agency said there was risk from even a successful recouping of the $1 billion break-up fee.
“While the break-up fee could be credit-positive, we believe the negative publicity could harm Twitter’s relationships with its advertisers, employees and investors in all possible scenarios,” S&P said.
The latest back-and-forth follows weeks of public squabbling between the sides after Mr Musk amplified the fake accounts issue, causing some analysts to speculate that he was getting cold feet about the deal, which drew criticism from progressive advocacy groups concerned about his political agenda.
Mr Musk’s norm-defying conduct has come as little surprise to long-time watchers, who are accustomed to a constant stream of statements from the Tesla and SpaceX chief that flout or test convention and sometimes provoke a crackdown from regulators.
Some market watchers predicted the deal would fall apart shortly after it was announced, but others still saw a way forward on Monday even in the wake of the latest happenings.
“While the two parties likely are facing a lengthy battle of which the final decision remains very uncertain, we believe Twitter may have the stronger case,” said Morningstar analyst Ali Mogharabi.
“We also think that a scenario remains where Musk and Twitter reach a new, lower-price agreement.”
But Mr Mogharabi lowered his estimate for Twitter shares to US$47 from Mr Musk’s bid price of US$54.20, saying: “We expect Twitter will likely face distractions that set back its efforts to grow revenue and expand margins.”
For analyst Dan Ives at Wedbush Securities, “this is a ‘code red’ situation for Twitter and its board as now the company will go head to head against Musk in a Game Of Thrones court battle”.
“We see no other bidders emerging at this time while legal proceedings play out in the courts.”
Briefing.com called the disintegration of the Musk deal “a worst-case scenario for the company in the short-to-intermediate term”, putting Twitter’s “future in limbo and creating a massive distraction”.