As the social media giant fought with Tesla founder Elon Musk over a $44 billion takeover deal, Twitter shares were on track for a sharp decline today.
Musk is seeking to leave Twitter, claiming that the company has not been transparent about how many of its accounts are “bots” or spam accounts. In order to hold him to the original terms of his offer—a $54.20 per share deal—Twitter has hired the prestigious New York law firm Wachtell, Lipton, Rosen & Katz. Twitter shares were down 8% in pre-market trading today to $34, significantly below the bid value due to the uncertainty surrounding the company.
Since Musk announced his offer earlier this year, the stock has decreased by 30%. They’ve decreased by half in the past year, and some analysts think they might decrease by half again.
He expressed skepticism and said the deal was on hold in May, claiming he was unaware of the prevalence of phony Twitter accounts at the time. Twitter claims that less than 5% of the 450 million users are bots.
Musk claimed to the Securities & Exchange Commission a month ago that Twitter had been dishonest about its operations, including the spam accounts. He now wants to completely leave.
Markets.com’s Neil Wilson said: “It might be the bots, but probably not. The valuation is most likely to blame; given how much the Nasdaq has dropped since the agreement was signed, Twitter is currently worth significantly less than $44 billion. Additionally, since the agreement was signed, Tesla’s stock, which supports Musk’s wealth, has decreased by more than a quarter.
Currently, it appears likely that the case will go to trial. One scenario is that Musk is permitted to withdraw but is required to pay a $1 billion break clause fee by the Delaware Court of Chancery, where the case would be heard.
US advertising guru and tech blogger Bob Hoffman stated: “Musk is concealing the fact that the price he and his partners agreed to pay is significantly more than Twitter is worth behind this ‘5% fake’ horsesh**. It’s all a game, and I think he will lose badly.
More than 100 million people follow Musk personally. He frequently uses Twitter to announce new Tesla products and, more recently, to make jokes about his expanding family after it was revealed that he had twins with one of his executives last year. He has ten children, which has led to Twitter jokes that he realized he can’t afford the takeover deal because his child support obligations are now so high.