Twitter takes legal action against Elon Musk

Twitter was hit hard Monday on Wall Street by Elon Musk’s abandonment of his plan to buy the social network, a decision “invalid and unjustified” according to the platform which requires that the multi-billionaire respect his commitments.

The title of the company fell 11.3% on the New York Stock Exchange to end at 32.65 dollars, 40% less than what the entrepreneur had offered when he announced his intention to put hand on Twitter mid-April.

But after several months of procrastination and more or less direct threats, Mr. Musk said in a letter to Twitter on Friday that he was terminating this agreement.

The company, he believes, failed to live up to its commitments by not disclosing enough information about fake accounts and spam, and by minimizing their number.

To justify his renunciation, Mr. Musk also invokes several recent decisions by Twitter such as the recruitment freeze, contrary to his obligation for the company to continue to operate normally.

False, Twitter’s lawyers officially replied in a letter sent Sunday to Mr. Musk and his legal representatives, and published Monday evening on the site of the American authority of the financial markets.

“Contrary to your letter’s assertions, Twitter did not breach any of the obligations under the agreement,” they wrote.

The social network therefore demands that the multi-billionaire keep its commitments.

Twitter claims in particular to have transmitted the information requested by Mr. Musk on the number of inauthentic accounts on its platform, which he claims to be less than 5% while the multi-billionaire estimates it to be much higher.

The reasons put forward by the entrepreneur do not legally justify a breach of contract, argue several specialists.

The two camps are therefore now engaged in a legal tussle, which could cost Mr. Musk several billion dollars if he were to lose.

Reputational risks

Earlier in the day, Mr. Musk had shared his first reaction on Twitter on Monday since the announcement of his withdrawal by posting an image containing four photos where he appears hilarious.

“They said I couldn’t buy Twitter. Then they refused to reveal the information about the fake accounts. Now they want to force me to take over Twitter in court. Now they are forced to reveal the fake account information,” reads alongside each snap.

Soon after, he posted a picture of actor Chuck Norris winning at chess, simply with the phrase “Chuckmate”, a pun on “checkmate” and the actor’s name.

Wedbush Securities’ Dan Ives said, “Twitter and its board are in ‘extreme danger’ as the company takes on Musk in a Game of Thrones-style legal battle to save the company. transaction or recover at least the $1 billion severance package. »

“We do not see any other bidder standing out at the moment, while the legal proceedings will begin in court,” adds the analyst.

Ali Mogharabi, analyst for Morningstar, however, believes that at the level where the action is currently evolving, “other parties could 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 on 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 the risks for the reputation” of the platform.

The slowdown in economic growth was expected to “significantly affect Twitter’s advertising revenue” which constitutes about 90% of its turnover, 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 advertisers, is not too damaged.

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