Musk wants to push back, arguing that Twitter has not specified how many of its accounts are “bots” — spam accounts. Twitter has hired the hip New York law firm Wachtell, Lipton, Rosen & Katz to force it to meet the original terms of the offer, a $54.20-a-share deal.
With uncertainty clouding the business, Twitter shares fell 8% in premarket trading today to $34, well below the asking price.
Shares fell 30% after Musk unveiled his bid earlier this year. They’ve halved in the past year, and some analysts predict they could halve again.
In May, he began to have doubts and said the deal was on hold, claiming he didn’t understand how many Twitter accounts were fake. Twitter reports that bots make up less than 5% of its total of 450 million.
A month ago, Musk complained to the Securities and Exchange Commission that Twitter was not open about its business, including spam accounts. Now he wants to leave altogether.
Neil Wilson of markets.com said: “It could be bots, but probably not. Rather, it’s a matter of valuation — the Nasdaq has fallen since the deal was signed, so Twitter is worth far less than $44 billion today by any normal model. In addition, Tesla shares, on which Musk’s wealth rests, have fallen by more than a quarter since the deal was signed.”
It is likely that the case will be taken to court at this point. One possibility is that the Delaware Court of Chancery, where it will be held, will allow Musk to walk away but order him to pay a $1 billion fee.
Bob Hoffman, American advertising guru technical blogger, said: “Musk is hiding behind this ‘5% fake’** to mask the fact that the price he and his partners have agreed to pay is far greater than what Twitter is worth. It’s all a game and I predict he’ll lose big.”
Musk himself has more than 100 million subscribers. He has often used Twitter to make announcements about Tesla, and most recently joked about his growing family after it was revealed that one of his executives had twins last year. He has 10 children, prompting Twitter to quip that his child support bills are now so high he realized he couldn’t afford a takeover deal.
The Twitter dispute pits Musk against fellow tech billionaire Jack Dorsey, the founder and former CEO of Twitter.