Musk Effort to Kill Deal Leaves Twitter With Only Bad Options

(Bloomberg) — Elon Musk’s effort to dump his agreement to buy Twitter Inc. leaves the social media service worse off, no matter the outcome.

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If the Tesla Inc. chief executive officer succeeds in ending the deal, Twitter stock will likely free-fall, and a staff already dejected by Musk’s months-long public criticism of the site will suffer another emotional blow. If Twitter prevails in court, the company will be run by an unpredictable and reluctant owner, while still struggling to meet ambitious growth targets.

Musk’s regulatory filing Friday announcing plans to walk away from his $44 billion purchase touched off a nightmare scenario for Twitter, where only bad options remain. Chairman Bret Taylor responded by vowing to enforce the deal in court, but the company’s leadership is already losing the trust of staff after months of uncertainty and stress.

Many of Twitter’s employees were already worried about the impact of Musk’s arrival. During a Q&A he held with Twitter employees in June, some workers mocked Musk over internal slack channels as he told employees that only those who were “exceptional” would be allowed to continue working from home. In weeks before the Q&A, still others fretted that Musk had no idea how to run a social network, and some posted their frustration about claims alleging Musk had sexually harassed former employees at his rocket company SpaceX. After Twitter leadership failed to acknowledge the allegations, one employee wrote that “as a woman working at Twitter, I find this radio silence extremely disheartening.”

Those feelings were directed toward Musk when employees thought he still wanted to buy the company. His change of heart has only intensified frustration with Musk and with Twitter’s management and board, which some employees are publicly mocking on Twitter — though there is an internal directive not to speak publicly about the deal, according to people familiar with the matter.

Staff were also on edge due to recent executive departures and restructuring of product leadership, making product development more difficult, the person said. Twitter cut roughly 100 employees this week, with staff expecting more to come.

“If Musk is able to terminate the deal, Twitter will still be left with the same problems it had before he came on the scene,” wrote Debra Aho Williamson, a principal analyst at Insider Intelligence. “Its user growth is slowing. And while ad revenue is still growing marginally, Twitter is now dealing with a slowing economy that could squeeze ad spending on all social platforms.”

If Twitter goes to court and fails to force Musk to buy the San Francisco-based company, he’ll likely sell his 9% stake and walk away. Twitter’s stock price — which already hadn’t reached the $54.20 per share that Musk had agreed to pay — will undoubtedly slide far below Friday’s $36.81 close. After months of anticipating a deal, Twitter will suddenly be back where it started April when Musk showed up on its doorstep.

That might not be a great place to be. Twitter’s business was looking questionable when Musk made his offer. The company had set lofty user growth and revenue targets for 2023, and the user target was looking more and more ambitious with every new quarter. Since Musk made his offer, Twitter has also implemented a hiring freeze, fired two top executives and cut some jobs.

The Twitter-Musk saga isn’t over. Musk will try to prove Twitter violated their merger agreement, and Twitter will fight to show it fulfilled its obligations. It’s possible Musk and Twitter renegotiate the price, or maybe Musk walks away, but pays Twitter a hefty settlement.

Despite Musk’s claims, the deal is not dead. But as far as Twitter’s options go, it may as well be.