Is it really about bots?
Tech entrepreneur Elon Musk announced his intention to back out of a widely publicized $44 billion takeover attempt of social media platform Twitter, which he signed off on in April.
But Musk can’t just walk away. The terms in the initial deal mean a court battle is likely, according to Twitter’s board chairman Confirmed The company is ready to secure the contract for “agreed price and terms”.
For months, Musk was openly unhappy with how the deal was progressing, as the Tesla CEO said he couldn’t be sure whether Twitter’s estimate of spam accounts on the platform was accurate, even after the company provided him with the relevant data in June.
But excluding possible bot accounts, the deal at $54.20 per share is significantly higher than Twitter’s stock value.
And a chart shows how much things have changed in the last three months.
Terms of Agreement
When Musk proposed to buy Twitter in April, he made a “best and final offer” to buy the company for $54.20 per share.
But since then, like many other tech companies, Twitter’s stock has been on a steady slide. Twitter’s shares have fallen nearly 20% since Musk first offered to buy the company in April and formally announced on July 8 that he would back out of the deal. Part of this decline was fueled by the market’s biggest decline over the past few months, which included a massive selloff in tech stocks that began in May.
When Musk announced his intention to terminate the deal last Friday, Twitter stock fell even further, to $36.86 per share. And shares slipped a further 6% to $34.61 in after-hours trading Friday after Musk’s announcement, representing a nearly 37% decline from the original acquisition price of $54.20.
Twitter’s share price slump showed few signs of abating when markets reopened this week. It closed yesterday at $32.65, a nearly 40% drop from the price Musk originally agreed to pay for the company.
Prolonged confusion over the acquisition, and Musk’s constant threats to terminate the deal if Twitter’s board doesn’t meet his demands, have left investors uncertain about the company’s future since the deal was signed.
Unfortunately for Twitter—and possibly Musk—the prospect of a drawn-out court battle means the price is more likely to be volatile.
Shares of Twitter could fall into the $25 to $30 range this week as chances of defending the deal grow dim, Wedbush analyst Daniel Ives wrote in an investor note on Friday.
“This is a disaster scenario for Twitter and its board, now that the company will fight Musk in a lengthy court battle to recover the deal and/or at least a $1 billion breakup fee,” Ives wrote, adding that Wall Street is “becoming wary of a court battle between Musk and Twitter’s board.”
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