It wasn’t Friday the 13th. It wasn’t the Ides of March. But for Twitter (NYSE:TWTR), July 8 will go down as possibly the most-important day in the social-networking company’s history.
Because on July 8, a line between Twitter’s (TWTR) high-flying past and now uncertain future was drawn when Elon Musk said he was terminating his $44B acquisition of the company. Nearly three months after calling Twitter (TWTR) the “digital town square” and that he wanted to “make Twitter better than ever,” Musk has, at least for now, said he doesn’t want to be involved with Twitter (TWTR), a place he said said was “where matters vital to the future of humanity are debated.”
And now, the future of Twitter (TWTR) itself may be up for debate.
The company said in a statement that it remains “committed to closing the transaction” at the agreed upon price of $54.20 a share, and that it will “pursue legal action to enforce the merger agreement” in Delaware Chancery Court.
But, with Twitter (TWTR) shares closing Friday at $35.04 a share–and down by more than 35% from the original company acquisition price, analysts say the company might be tilting at windmills if it thinks it will get anywhere near its April pricetag of $44B, if anything at all.
“While Twitter has sued to force Musk to follow through on the purchase, I believe the best they can get is the $1 billion breakup fee from Musk,” said Tim Bajarin, longtime Silicon Valley tech analyst and director of consultancy Creative Strategies. “Although he will probably fight this as well.”
At issue is Musk’s belief that Twitter (TWTR) hasn’t done enough to address the matter of fake, spam or bot accounts on its site. In a filing with the U.S. Securities and Exchange Commission, representatives for Musk said that despite what it claimed, Twitter (TWTR) “appears to have made false and misleading representations upon which Mr. Musk relied when entering into the merger agreement,” and that with regards to Musk’s requests for clarity around the bot issue, Twitter (TWTR) sometimes “has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.”
Dan Ives, of Wedbush Securities, slashed his price target on Twitter’s (TWTR) stock to $30 a share from $43, and left his neutral rating on the stock intact. Ives said Twitter (TWTR) is now facing a “code red” situation with Musk with a court fight that could potentially take years to resolve.
“The worries are on multiple fronts for Twitter,” Ives said. “Employee turnover, advertising headwinds, daily average user metrics that the Street will be skeptical of after this fiasco, [and a] myriad of other issues from this earthquake.”
Ives said that Twitter (TWTR) investors are likely to have the nerves tested on Monday when U.S. stock markets as he estimates the company’s shares will trade in a range of $25 to $30 a share. When it comes to a white knight, or any other potential buyer coming in to rescue Twitter (TWTR) from its current drama, Ives said that no one should hold their breath on the matter.
“This soap opera has seen many twists and turns and now, ultimately, Twitter and its board goes back to the drawing board,” Ives said. “[But] we see no other bidders emerging as this time while legal proceedings play out in the courts.”
Earlier in the week, Twitter (TWTR) tried to allay Musk’s concerns about bots and spam accounts by saying its data showed that it had less than 5% of such accounts among its users.