Shares of Twitter were down 5.3% in pre-market trading on July 11, following Elon Musk’s termination of the $44 billion deal late Friday, July 8.
By Yaёl Bizouati-Kennedy
See: Twitter Shares Tumble as Their ‘Fire Hose’ Data Can’t Be Verified — Musk Deal in DoubtFind: Elon Musk Forces Twitter’s Hand on Bot Data, Social Media Platform To Provide Full Access
In a Securities and Exchange Commission (SEC) filing, Musk’s lawyers wrote this was “because Twitter is in material breach of multiple provisions of that agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse effect.”
“This morning Twitter begins Day 1 as a public company post Musk formally terminating the acquisition on Friday night,” Wedbush Securities analyst Dan Ives wrote in a July 11 note. “For Twitter, this fiasco is a nightmare scenario and will result in an Everest-like uphill climb for Parag & Co. to navigate the myriad of challenges ahead around employee turnover/morale, advertising headwinds, investor credibility around the fake account/bot issues, and host of other issues abound.”
Ives added that today, Twitter’s stock will start to trade on a standalone basis “with a valuation range that we view as $25-$30 being fair value based on its peer group and growth profile: and deems the situation a “code red” for the stock.
Wedbush maintained its Neutral rating and a $30 price target.
Bret Taylor, Twitter Chairman, tweeted on July 8 that “the Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.”
To which, the richest man on the planet replied in typical Musk-fashion, with Twitter memes.
Bloomberg reported July 10 that Twitter hired merger law firm Wachtell, Lipton, Rosen & Katz to sue Musk and plans to file a suit early this week.
Ives added in the note that “Musk does not come out of this looking like roses, it’s a black eye moment for him the way this circus show was handled since April and many investors will continue to view this as a buyers remorse situation with a market dramatically changing since April and the fake account issue the scapegoat which has turned into a life of its own.”
He also said in a July 8 note that while this will provide some relief for Tesla, “as this situation was an overhang on the stock, but the Street is wary of the looming court battle ahead between Musk/Twitter Board.”
Bear Market Guidance: 5 Steps New Investors Should Take Before Putting Money Into the Stock MarketFind:How To Start Investing and Win Big, According to WallStreetBets’ Founder Jaime Rogozinski
