Twitter is stuck. Elon Musk has decided he no longer wants to buy the social media site for $44bn after all. Neither side is likely to emerge from this fight in good shape.
Twitter intends to sue the electric vehicles boss to enforce the deal’s closure at the agreed price of $54.20 per share. It has hired elite law firm Wachtell, Lipton, Rosen & Katz to represent it.
An expensive legal battle is in no one’s interest. But Musk leaves Twitter with little choice. If it allows Musk to walk away, it may face lawsuits from its own shareholders.
Twitter’s board has run out of good options. Since Musk unveiled his bid on April 14, technology stocks have sold off heavily amid rising interest rates and recession fears. Musk’s bid provided Twitter with a temporary floor. But shares have since shed a quarter of their value and trade 37 per cent below Musk’s offer price.
At its peak in February 2021, the stock was worth more than $77 a piece. But Twitter’s slow pace of growth and dependence on advertising income, along with a wholesale revaluation of tech stocks, mean the social network has no feasible way to regain those heights until its fight with Musk comes to an end.
While it continues, so will unrest at the company. Top executives have resigned. Mass lay-offs and cost-cutting measures have been announced. Among the remaining employees, morale is low. Advertisers, which contributed nearly 90 per cent of group revenue last year, are rattled by Musk’s incessant and negative focus on the network’s number of fake accounts.
Twitter’s ambitious goal of increasing annual revenue to $7.5bn and reaching 315mn daily users by the end of 2023 — growth of about 50 per cent from 2021 levels — looks less realistic by the day. The only winners in this mess will be the lawyers.
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