Twitter shares slump as Musk deal backtrack sets scene for legal battle
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Synopsis
Shares dropped 6.6% to $34.40 as of 9:38 a.m., on track to erase about $1.8 billion in market value, after Musk backed out of an agreement to buy the social-media giant and take it private. Shares in Tesla Inc., the electric carmaker that Musk leads, fell about 1%.
Twitter shares have been trading well below the $54.20-per-share offer Musk made in April. The billionaire alleges that Twitter misrepresented user data, saying the number of spam bots on the platform is much higher than the company has disclosed. The stock has also been falling along with the tech sector amid rising interest rates.
“It’s not a huge surprise to anyone that Musk is trying to abandon the deal,” said Vital Knowledge founder Adam Crisafulli. “The problem, though, is that this whole saga was probably quite disruptive over the last few months, which could weigh on Twitter’s performance not only in the second quarter but third quarter too.”
With a $1 billion breakup fee on the line, traders are bracing for more chaos as Twitter takes Musk to court.
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“Musk getting away with just paying $1 billion would be a big win for him.”
“The company is well known but it’s not a great business,” said Kimberly Forrest, founder and chief investment officer of Bokeh Capital Partners. “Wall Street needs companies to show revenue and/or earnings growth. Twitter doesn’t seem to have a plan to grow either at this point.”