Twitter sinks to four-month low as investors brace for legal battle after Musk rejects £37bn takeover

Shares in Twitter fell to their lowest level in four months as the row over Elon Musk’s stalled £37bn takeover of the platform continued to heat up.

The social media site fell about 10 percent to $33.18 on Wall Street after the reports, which were prepared by lawyers to prepare for what is expected to be a nasty legal battle after Musk last week said that rejects the transaction.

Twitter has hired New York law firm Wachtell, Lipton, Rosen & Katz to fight the founder of electric car maker Tesla and is preparing to file a lawsuit in Delaware court this week.

No deal: Twitter fell 10% on reports it prepared with the help of lawyers to prepare for what is expected to be a nasty legal battle after Elon Musk (pictured) backed down from a $37 billion takeover pounds

Musk, the world’s richest man, said he had decided against taking over Twitter because of what he claimed were “false and misleading statements” on the social media site, particularly about how many user accounts were fake.

Wachtell is considered one of the top law firms in the world for litigating M&A cases.

His lawyers are no strangers to Musk’s antics: Wachtel previously defended the billionaire against a shareholder lawsuit related to the rescue of energy company SolarCity, part of his corporate empire.

Firms including auction house Sotheby’s and private equity giant KKR have also sought the services of Bill Savitt, a partner at the law firm.

Musk’s representatives say Twitter did not provide information on how it estimated the number of spam accounts on the platform.

The billionaire said about 20 percent of Twitter’s 330 million accounts were fake, not the 5 percent Twitter claimed.

But Twitter co-chief executive Brett Taylor insisted the board is “committed to closing the deal” and “plans to take legal action to secure the merger.”

In a note, analysts at US brokerage Wedbush said the situation was a “nightmare scenario” for Twitter and that its management team would face an “Everest-like climb” to wage a legal battle that could last until next year.

“This is going to be a long and ugly legal battle that will soon cast a dark cloud over Twitter,” Wedbush said.

But the broker added that the fall will also be “a moment for Musk, 51, and that many investors will continue to view the situation as a moment of ‘buyer’s remorse.’

“In a nutshell, this is a code red situation for Twitter and its board because the company will now face Musk in a lawsuit against Game of Thrones,” Wedbush analysts said.

According to the original agreement, Musk would have to pay Twitter $1 billion to break the deal.

But the company may be looking to extract a higher price from the billionaire through the courts. Shares of Twitter rose in mid-April when it became known that Musk had offered to buy the group for $54.20 per share.

But doubts about the high price and market turmoil mean the share price has fallen 24 percent since the offer was announced.

Meanwhile, Tesla shares, through which Musk derives most of his wealth with a 15.7 percent stake, are down 26 percent from before the saga began, amid investor concerns that owning Twitter will distract the billionaire from his duties as chief executive .

While Twitter and Tesla investors will be cursing Musk for their losses, sellers who make money betting on the company’s share price to fall will likely sit on their profits.

One is Hindenburg Research, which warned in May that there was a “significant risk” that the takeover price would be undercut and that Twitter’s share price could fall by 50 percent if the deal was called off.

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