Twitter shares sank 6% at Monday’s market open as investors reacted to Elon Musk backing out of his deal to buy the company. Twitter’s board plans to sue the eccentric billionaire to hold him to his $44 billion takeover deal he made three months ago.
On April 25, when Twitter accepted the deal, shares closed at $51.70, just shy of the $54.20 Musk offered. But as Musk attempts to abandon the deal, shares opened Monday at $34.60, 36% below his initial offer price.
Musk has been expressing buyer’s remorse for months and has attempted to pin it on spam bots, saying the company has misrepresented the number of fake users on the platform and how it calculates bots. Twitter has regularly maintained that bots account for less than 5% of users.
If the Twitter board has its way, Musk will be forced to close the deal at $44 billion. Otherwise, the company could try to hold him to a $1 billion breakup fee that is written into the acquisition agreement.
Musk will try to walk away from the deal by proving in court what’s called “material adverse effect,” where something happens that significantly lowers the value of the company. Musk’s lawyers allege in an SEC filing that Twitter is in “material breach of multiple provisions” in the agreement and have made “false and misleading representations” surrounding bots.
Musk could also use the legal saga to try to negotiate a better price for the company, considering the current market value is much lower than his offer.
The Tesla CEO had originally announced intentions to buy Twitter after taking a large stake in April, becoming the company’s largest shareholder. He declined a board seat and instead offered a buyout, saying at the time that he wanted to take the company private to transform it into “the platform for free speech around the globe.”
Conservatives had flooded back to the platform on news of the deal, likely hoping Musk’s ownership would change content moderation policies.