Elon Musk says he is no longer interested in completing the $44 billion Twitter (TWTR) buyout. Meanwhile, Twitter shares fell almost 5% during the regular session on July 8 and dropped an additional 4.8% in the extended trading hours to settle at $35.04. Musk, who is also the CEO of electric car manufacturer Tesla (TSLA), had earlier agreed to acquire the social media company for $54.20 per share.
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Why Did Musk Change His Mind on the Twitter Buyout?
According to Musk, Twitter’s actions led to the collapse of the deal. Musk has accused Twitter of refusing to provide him with sufficient information needed to assess the extent of fake accounts on its platform. While Twitter maintains that fake accounts make up less than 5% of its account volume, Musk believes they are at least 20% of the total accounts.
Another reason Musk cites for seeking to walk away from the Twitter deal is job cuts at the social media company that happened without his consent. He mentions that Twitter fired its General Manager of Consumer and the revenue product lead without seeking his permission. Moreover, Musk cites Twitter’s announced layoff of its talent acquisition team as a violation of their agreement.
What’s Next for Twitter?
Twitter plans to sue Musk in a bid to enforce their agreement. According to a Reuters report, the social media company has hired the law firm Wachtell, Lipton, Rosen & Katz to spearhead its legal fight against Musk. The law firm previously worked for Musk in a separate case. This is shaping up to be a high-stakes legal battle. Depending on how the matter ends, either Musk or Twitter could be liable for a $1 billion breakup fee.
Analysts Recommend Holding Twitter Stock
The stock has a Hold consensus rating based on 23 Holds. The average Twitter price target of $49.40 implies 34% upside potential to current levels.
Bloggers Are Bullish About TWTR
TipRanks data shows that financial blogger opinions are 67% Bullish on TWTR, compared to a sector average of 64%.
Key Takeaway for Investors
Musk can be a highly unpredictable person. He may either seek to terminate the deal or force Twitter back to the table to negotiate the buyout price. Twitter shares have dropped sharply from where they were when Musk agreed to purchase the company.
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