Twitter Shares Down More Than 6% In Pre-Market As Legal Fight Against Musk Looms

Topline

Twitter shares continued to slide in pre-market trading early on Monday morning as the social media giant prepares to sue billionaire Elon Musk for attempting to renege on a deal to acquire it for $44 billion last week.

Twitter’s shares continued to tank in pre-market trading as it deals with the fallout of Musk’s … [+] attempt terminate a deal to acquire the company.

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Key Facts

Twitter’s shares were down more than 6% in pre-market trading early on Monday, trading at $34.37 per share.

The pre-market values would place Twitter’s market cap at around $26 billion, or 40% lower than the sum Musk had agreed to pay to acquire the company and take it private at $54.20 a share.

The company’s shares have taken a beating since Friday after Elon Musk disclosed in an SEC filing that he wants to walk away from the deal—accusing Twitter of failing to provide the data he needs to establish the number of bots and spam accounts on its platform.

Twitter, however, plans to enforce the deal by suing Musk in the Delaware Court of Chancery, the state where the company is incorporated.

Chief Critic

Musk has not directly made a statement about his plan to exit the deal and Twitter has promised legal action against him. But the billionaire tweeted out a meme about the saga late on Sunday night suggesting that any court case against him will force Twitter to disclose the number of bots on its platform—a detail he claims Twitter has not disclosed to him. “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,” the meme read.

Tangent

Twitter has hired the law firm Wachtell, Lipton, Rosen & Katz to help with its planned legal proceedings against Musk, Bloomberg reported, citing unnamed sources. The report adds that WLRK served as a legal adviser for Musk in 2018 when he announced a plan to take Tesla private. That deal also did not go through, prompting the SEC to hit both Musk and Tesla with fines of $20 million each to settle fraud charges. Martin Lipton, one of the founding partners of WLRK, is the original creator of the shareholder rights plan more commonly known as the “poison pill” which is designed to protect a company against hostile takeovers. The poison pill was one of the plans that Twitter considered before agreeing to Musk’s acquisition plan.

Key Background

On Friday, Musk told Twitter he was “terminating” the $44 billion deal to acquire the company and accused it of breaching “multiple provisions” of the purchase agreement by not providing Musk with adequate information. Musk’s lawyer, Mike Ringler, said he was not provided with adequate information regarding the number of bots or spam accounts on the social media platform. Several observers have questioned Musk’s claim on this issue, pointing out that Twitter publicly discloses this information in all its regulatory filings. Bloomberg columnist Matt Levine wrote that Musk’s attempt to buy Twitter was simply him trying to drum up some drama and he actually had no intent to buy the company. Others have pointed out that Musk’s reticence is likely driven by the recent slump in tech stocks like Twitter, which means he would end up overpaying for the company significantly. However, experts believe it will be difficult for Musk to legally wiggle out of this deal as in the Delaware court the burden of evidence rests on the acquiring party trying to terminate the deal.

Big Number

$237.9 billion. That is the total net worth of Elon Musk as of Monday morning according to Forbes’ real-time tracker, making him the richest man in the world.