It’s official. Elon Musk has canceled his proposed $44 billion takeover of Twitter (NYSE:TWTR). The news has TWTR stock trading down 6% today.
Lawyers for Musk, who is the CEO of electric vehicle maker Tesla (NASDAQ:TSLA), have told Twitter’s board of directors that he is terminating the deal over concerns about the number of bots and fake accounts on the social media platform. Twitter responded by saying that it plans to pursue legal action to enforce the acquisition agreement, sending the saga to the courts.
Before today, TWTR stock had fallen 14% year to date to $36.81 per share.
What Happened to the Twitter Deal
News that Musk has ended his bid to acquire Twitter for $54.20 per share does not come as a surprise. The billionaire entrepreneur has been hinting for months that he may abandon the deal and has publicly taken issue with the number of fake accounts on the site. Musk has repeatedly said Twitter has not been upfront about the number of illegitimate accounts on its platform.
However, Twitter management has maintained that only 5% of its monetizable daily active users are fake accounts. The company said it has given Musk the information he needs to verify its claims.
Bret Taylor, chair of Twitter’s board of directors, said the company will take Musk to court for failing to honor the agreement he signed to buy Twitter for a total of $44 billion. Musk responded to Taylor by posting an image on Twitter over the weekend that featured him laughing and text claiming the company wants to “force” him to buy it in court.
Separately, Twitter also announced it is laying off 30% of its talent acquisition team. This is the latest in a series of headcount reductions at the company, which it says are due to ongoing market volatility.
Why It Matters
The drama over whether Musk will buy Twitter has caused havoc at the social media giant. After the deal was signed, Twitter let go of the head of its consumer division and its revenue product lead. Twitter has also lost its chief design officer and head of engineering in recent months. TWTR stock has been roiled by Musk’s repeated threats to abandon the deal.
Shareholders of Twitter have launched a separate lawsuit against Musk, accusing him of deliberately trying to lower the price of TWTR stock so that he can buy the company for less than the amount originally agreed to this past spring. The drama does not appear to be over, and is now headed to court where Twitter’s management will try and hold Musk accountable for the deal he signed.
What’s Next for TWTR Stock
Where Twitter goes as the saga with Elon Musk plays out in the courts remains to be seen. While the acquisition might eventually go through, it likely won’t happen until after a lengthy court battle.
In the meantime, the price of TWTR stock can be expected to slump amid the ongoing uncertainty. Investors who hold Twitter shares will need to continue being patient.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.