According to analysts (AFP / Olivier DOULIERY) slowing economic growth was expected to “significantly affect Twitter ad revenue”
Twitter was hit hard on Wall Street on Monday by Elon Musk’s abandonment of his social network purchase plan, an “invalid and unwarranted” decision according to the platform requiring the multibillionaire to stick to his commitments.
The company’s stock fell 11.3% on the New York Stock Exchange to close at $ 32.65, 40% less than what the entrepreneur offered when he announced plans to tweet halfway through. April.
But after several months of procrastination and more or less direct threats, Mr. Musk said on Friday in a letter to Twitter that he was terminating this deal.
The company, she believes, has failed to deliver on its commitments by failing to disclose enough information about fake and spam accounts and minimizing their numbers.
To justify his waiver, Musk also invokes several recent Twitter decisions such as a hiring freeze, contrary to his obligation for the company to continue operating normally.
False, Twitter’s lawyers officially responded in a letter sent Sunday to Mr. Musk and his legal representatives, and posted on the American financial markets authority’s website Monday evening.
“Contrary to your letter, Twitter has not violated any of its obligations under the agreement,” they wrote.
The social network therefore requires the multibillionaire to keep his commitments.
Twitter specifically claims to have passed on the information Mr. Musk requested about the number of inauthentic accounts on his platform, which he believes is less than 5% while the multibillionaire estimates it to be much higher.
The reasons given by the entrepreneur do not legally justify a breach of the contract, several specialists argue.
The two camps are therefore now engaged in a legal brawl, which could cost Mr. Musk several billion dollars if he were to lose.
– Reputational risks –
Earlier in the day, Mr. Musk shared his first reaction on Twitter on Monday since his retirement announcement by posting an image containing four photos in which he appears hilarious.
Businessman Elon Musk in Vancouver, Canada on April 14, 2022 (TED Conferences, LLC / Ryan Lash)
“They said I couldn’t buy Twitter. Then they refused to reveal false account information. Now they want to force me to buy Twitter in court. Now they have to reveal false account information,” we can read next to each shot.
Soon after, he posted a picture of actor Chuck Norris winning at chess, simply accompanied by the phrase “Chuckmate”, a pun on “checkmate” and the actor’s name.
Wedbush Securities’ Dan Ives said, “This is an ‘extremely dangerous’ situation for Twitter and its board of directors as the company faces Musk in a Game of Thrones-style legal battle to save the deal. Or recover at least $ 1. billion in severance pay. ”
“At the moment we do not see any other bidders in evidence, while the legal process will begin in court,” adds the analyst.
Morningstar analyst Ali Mogharabi, however, believes that at the level where the stock is currently trading, “other parties may be interested in Twitter.” There is still the scenario where Elon Musk ends up buying the group, but at a lower renegotiated price, he adds in a note.
Without advancing the outcome of the legal battle, analysts from the rating agency S&P Global Ratings note that, in any case, this “increases the uncertainty and reputation risks” of the platform.
The slowdown in economic growth should have “significantly impacted advertising revenue” for Twitter, which makes up about 90% of its revenue, they also argue.
They plan to lower Twitter’s rating by one or more notches if the transaction is confirmed at the original price or if it is canceled. On the other hand, they could decide to leave it at its current level if the two parties reach an agreement and that the reputation of the social network, both with its users and with advertisers, is not too damaged.
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