Twitter plunges to its lowest level in four months as investors brace for a legal battle after Musk bid farewell to the £37bn takeover
Twitter shares fell to their lowest level in four months as disputes over Elon Musk’s aborted £37 billion takeover of the platform continued to escalate.
The social media site fell around 10 percent on Wall Street to $33.18 after reports were written by lawyers to prepare for what is expected to be an uncomfortable legal battle after Musk said last week he was being backed out of a deal distance yourself
Twitter has hired New York law firm Wachtell, Lipton, Rosen & Katz to fight the founder of electric carmaker Tesla and is preparing to file a lawsuit in Delaware courts this week.
No deal: Twitter fell 10% on reports it was drafted by lawyers to prepare for what is expected to be an uncomfortable legal battle after Elon Musk (pictured) walked away from a £37billion takeover
Musk, the world’s richest man, said he decided to abandon his acquisition of Twitter because the social media site allegedly made “false and misleading representations,” particularly regarding how many of his user accounts were fake.
Wachtell is recognized as one of the best law firms in the world for resolving disputes when mergers and acquisitions go awry.
His lawyers are no strangers to Musk’s antics, as Wachtell previously defended the billionaire against a shareholder lawsuit related to a bailout of energy company SolarCity, part of his corporate empire.
Firms such as auction house Sotheby’s and private equity giant KKR have also enlisted the services of Bill Savitt, one of the law firm’s partners.
Musk officials claim that Twitter has not provided any information on how it estimates the number of spam accounts on the platform.
The billionaire said up to 20 percent of Twitter’s 330 million accounts are fake, not the 5 percent figure Twitter claims.
However, Twitter co-chief Bret Taylor insisted the board is “committed to completing the transaction” and “plans to take legal action to enforce the merger.”
In a note, analysts at US brokerage Wedbush said the situation was a “nightmare scenario” for Twitter and that the management team would face an “Everest-like ascent” to handle the legal battle, which could last into next year.
“This is going to be a long and ugly court battle and is casting a dark cloud over Twitter for the foreseeable future,” Wedbush said.
But the broker added that the debacle would also be a “blue moment” for Musk, 51, and that many investors would continue to view the situation as a “buyer’s regret” moment.
“In short, this is a Code Red situation for Twitter and its board as the company now faces Musk in a Game of Thrones court battle,” Wedbush analysts said.
Under the original agreement, Musk will have to pay Twitter a $1 billion disruption fee for terminating the deal.
But the company could try to elicit a higher price from the billionaire in court. Twitter’s stock soared in mid-April when it was announced that Musk had offered to buy the group for $54.20 a share.
But doubts about the high costs and market turmoil have caused the share price to fall 24 percent since the offer was announced.
Meanwhile, shares in Tesla, through which Musk derives most of his wealth from a 15.7 percent stake, are worth 26 percent less than before the saga began, as investors fear that owning Twitter will deprive the billionaire of his duties as a CEO would distract.
While Twitter and Tesla investors will be cursing Musk for their losses, short sellers who make money by betting on a company’s stock price falling should be sitting on profits.
One of them is Hindenburg Research, which in May warned of a “significant risk” that the price of the acquisition would be reduced and that Twitter’s share price could fall by 50 percent if the deal were scrapped.
Twitter dives as investors brace for legal battle over Musk debacle
Source link Twitter dives as investors brace for legal battle over Musk debacle