Twitter was hit hard Monday on Wall Street by Elon Musk’s abandonment of his plan to buy the social network, a decision “invalid and unjustified” according to the platform which requires that the multi-billionaire respect his commitments.
The title of the company fell 11.3% on the New York Stock Exchange to end at 32.65 dollars, 40% less than what the entrepreneur had offered when he announced his intention to put hand on Twitter mid-April.
But after several months of procrastination and more or less direct threats, Elon Musk said in a letter to Twitter on Friday that he was ending this agreement.
The company, he believes, failed to live up to its commitments by not disclosing enough information about fake accounts and spam, and by minimizing their number.
To justify his renunciation, Elon Musk also invokes several recent decisions by Twitter such as the recruitment freeze, contrary, according to him, to the obligation for the company to continue to operate normally.
False, Twitter lawyers officially replied in a letter to Elon Musk and his legal representatives on Sunday, and published Monday evening on the site of the American authority of the financial markets.
“Contrary to the assertions in your letter, Twitter did not breach any of the obligations under the agreement,” they write.
The social network therefore demands that the multi-billionaire keep its commitments.
Twitter claims in particular to have transmitted the information requested by Elon Musk on the number of inauthentic accounts on its platform, which he claims to be less than 5% while the multi-billionaire estimates it to be much higher.
The reasons put forward by the entrepreneur do not legally justify a breach of contract, argue several specialists.
The two camps are therefore now engaged in a legal tussle, which could cost Elon Musk several billion dollars if he were to lose.
Reputational risks
Earlier in the day, Elon Musk had shared his first reaction on Twitter on Monday since the announcement of his withdrawal by posting an image containing four photos where he appears hilarious.
“They said I couldn’t buy Twitter. Then they refused to reveal the information about the fake accounts. Now they want to force me to take over Twitter in court. Now they are forced to reveal the information on the fake accounts”, can we read next to each snapshot.
He soon after posted a photo of actor Chuck Norris winning at chess, simply accompanied by the phrase “Chuckmate”, a pun on “checkmate” and the actor’s name.
Wedbush Securities’ Dan Ives said, “This is ‘extremely dangerous’ for Twitter and its board as the company takes on Musk in a Game of Thrones-style legal battle to save the company. transaction or recover at least the $1 billion severance package.
“We do not see any other bidder standing out at the moment, while the legal proceedings will begin in court,” adds the analyst.
Morningstar analyst Ali Mogharabi, however, believes that at the level the stock is currently trading, “other parties may be interested in Twitter.” There is still the scenario where Elon Musk ends up buying the group, but at a lower renegotiated price, he adds in a note.
Without advancing on the result of the legal battle, analysts from the rating agency S&P Global Ratings note that in any case, this “increases the uncertainty and the risks for the reputation” of the platform.
The slowdown in economic growth was expected to “significantly affect revenue” from Twitter, which constitutes about 90% of its turnover, they also argue.
They plan to lower Twitter’s rating by one or more notches if the transaction is confirmed at the original price or if it is canceled. On the other hand, they could decide to leave it at its current level if the two parties reach an agreement and that the reputation of the social network, both with its users and advertisers, is not too damaged.