The Twitter stock dropped on Monday after Tesla CEO Elon Musk backed out of a $44 billion deal to acquire the social media giant.
On Wall Street, the platform stock fell 5.46 per cent to $34.80 by 7:05 a.m. (11:05 GMT). It had dropped 5.10 per cent before the weekend.
According to a letter from his lawyers filed with the Securities and Exchange Commission, Musk pulled the plug on the deal on Friday, accusing the company of making “misleading” statements about the number of fake accounts.
Musk’s attempt to cancel the April agreement sets up an epic court battle over a billion-dollar breakup fee. The social network claims that the number of fake accounts is less than 5%, a figure that the multi-billionaire believes is much higher.
Twitter has reportedly hired prominent New York law firm Wachtell, Lipton, Rosen & Katz. Twitter did not respond to AFP’s request for comment.
After the news broke, Musk tweeted: “They said I couldn’t buy Twitter. Then they wouldn’t disclose bot info. Now they want to force me to buy Twitter in court. Now they have to disclose bot info in court”, accompanied by pictures of him laughing.
According to Wedbush Securities analyst Dan Ives, “this is a code red situation for Twitter and its Board, as the company will now go head to head against Musk in a Game of Thrones court battle”.
“At this time, we see no other bidders emerging while legal proceedings are ongoing in the courts”.
Why Musk Abandoned Twitter Deal
Musk made an offer to buy 100% of Twitter for $44 billion in cash in April, at $54.20 per share, which was a 54% premium on the price the day he began investing in Twitter.
However, almost three months later, on the weekend, Musk stated in a filing with the US Securities and Exchange Commission (SEC) that he wanted to terminate the agreement because Twitter was in “material breach” of their agreement and had made “false and misleading” statements during negotiations.
Meanwhile, the social media company has stated that it intends to take legal action to enforce the agreement.
Twitter announced in May that it suspends over 500,000 accounts suspected of spam every day. Furthermore, it stated that millions of accounts that are unable to pass human verification are locked each week.
Twitter CEO, Parag Agrawal, previously explained the company’s efforts to reduce spam accounts.
He also stated that the company faced the challenge of many accounts that appear to be fake because they lack images, but are later verified to be real people.
Musk claimed Twitter failed to provide him with critical information about the prevalence of fake or spam accounts on its platform, a concern he raised in May. At the time, he said the deal was “temporarily on hold” until he received data from Twitter, which claimed that spam and bot accounts account for less than 5% of its total users.