Twitter Shares Plunge After Elon Musk Backs Away From $44B Deal

Etan Vlessing
·3 min read
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Shares in Twitter have tumbled after Elon Musk abandoned his $44 billion deal for the social media giant.

On Monday, Twitter’s stock price was down $4.16, or 11.3 percent, to $32.65 after news that Musk had terminated the takeover deal on grounds the target company was in “breach” of the merger agreement. On Friday, in a letter to Twitter, Musk reiterated the social media giant did not provide enough information about its bot and spam accounts on the platform, and did not give Musk and his team enough data to conduct their own analysis.

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Also Monday, Musk posted a meme on his Twitter account that mocked the management of the social media platform for threatening to take him to court over the deal. “Now they have to disclose bot info in court,” the tweet, with a laughing Musk included, read to the billionaire investor’s 101 million Twitter followers.

The steep share price fall is seen as a warning that Wall Street investors do not want to see a prolonged legal fight over the Twitter deal. To increase the likelihood of that scenario, Twitter has signaled it will sue Musk over the dropped deal to ensure the transaction is completed.

To ratchet up the legal stakes, Twitter responded to Musk’s July 8 formal notice of dropping the takeover by issuing its own July 11 letter from William Savitt of Wachtell, Lipton, Rosen & Katz in which it claimed the proposed termination was “invalid and wrongful,” and represented a repudiation of the agreed deal terms.

“Contrary to the assertions in your letter, Twitter has breached none of its obligations under the agreement, and Twitter has not suffered and is not likely to suffer a company material adverse effect. The purported termination is invalid for the independent reason that Mr. Musk and the other Musk parties have knowingly, intentionally, willfully, and materially breached the agreement … The agreement is not terminated, the bank debt commitment letter and the equity commitment letter remain in effect, and Twitter demands that Mr. Musk and the other Musk parties comply with their obligations under the agreement,” Savitt said in a letter made public via an SEC filing.

“Twitter reserves all contractual, legal, and other rights, including its right to specifically enforce the Musk parties’ obligations under the agreement,” the formal response from Twitter added, as a possible prelude to an expected lawsuit.

All of which leaves market watchers undecided about how a protracted legal fight over Twitter may turn out, and what impact that will have on the company’s share price.

“TWTR remains a difficult situation to predict/trade but the desk continues to believe that the most likely outcome remains an eventual price cut. Their expected value analysis based on a 20 percent chance that the deal closes on $54.20/share terms, a 50 percent chance that the price is cut to $44.20/share and a 30 percent chance of a failed transaction, suggests a current TWTR price of about $39.50/share,” read a July 9 Jefferies Report, issued by Jefferies LLP.

The merger fight could yet drag on amid speculation that suggests Musk wants to renegotiate the terms of a potential takeover of Twitter to take the company private. Failing that, Musk may be on the hook to pay a $1 billion breakup fee for walking away from the takeover.

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