After billionaire Elon Musk announced he was dropping his $44 billion bid for the firm and the social media platform pledged to sue Musk, Twitter’s shares are down more than 6% in premarket trading.
(AP) NEW YORK — After billionaire Elon Musk announced he was dropping his $44 billion offer for the company and the social media platform pledged to sue Musk in court to uphold the deal, Twitter shares fell more than 6% before the market opened on Monday.
Musk claimed on Friday that Twitter has not been transparent enough about the number of bogus accounts it has. However, after Musk said that he would purchase the social media site, Twitter stated last month that it was providing him with a “firehose” of raw data on hundreds of millions of daily tweets.
Although Twitter has long stated in regulatory filings that it believes 5% of the accounts on the service are fraudulent, Musk continued to mock the company on Monday through Twitter due to what he has called a dearth of data.
As part of the buyout agreement, Musk agreed to a $1 billion breakup fee, but it appears Twitter CEO Parag Agrawal and the company are preparing for a legal battle to compel the sale.
According to Wedbush analyst Dan Ives, who follows the company, “Twitter this fiasco is a nightmare scenario and will result in an Everest-like uphill climb for Parag & Co. to navigate the myriad challenges ahead around employee turnover/morale, advertising headwinds, investor credibility around the fake account/bot issues, and host of other issues abound.”
The price of a Twitter share fell below $35 due to the sell-off, well below the $54.20 Musk agreed to pay for the company. That strongly implies that Wall Street has severe questions about the deal’s viability.
The phony account/bot issue will be closely studied and will cast a shadow over Twitter’s future, according to Ives. “This is going to be a lengthy and unpleasant court battle ahead (Twitter has already recruited counsel),” he added.
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