Twitter’s future is uncertain as it faces a messy split from Musk – AFR

Courted by the world’s richest person and then dumped, Twitter appears well-positioned to win a court battle with Elon Musk over a $1 billion-plus breakup fee — but the company won’t get away scot-free.

The entire saga has stunned observers with what Wedbush analyst Dan Ives called “one of the craziest business stories of all time.”

“I think it starts as a circus show and ends as a circus show,” Ives told AFP.

Musk, the founder of electric car company Tesla, sent a letter to Twitter on Friday saying he was pulling out of the controversial deal he struck in April to buy the platform for $54.20 a share, or $44 total billion dollars to buy.

But such merger agreements “should prevent buyers from getting cold feet and deciding they want to leave,” said Ann Lipton, a Tulane University law professor who specializes in corporate litigation.

Musk, who also runs SpaceX, has accused the social media giant of “false and misleading representations” about the number of fake accounts on its platform.

His lawyers also point to the recent firings and hiring freezes of Twitter employees who they say contradict the company’s commitment to business as usual.

Those arguments may be valid, but they don’t justify going out of business, says Lipton, dismissing her as “fussy.”

“It’s not enough unless he can prove that the accounts (about fake accounts) are not only false, but dramatically challenge the fundamentals of the deal,” she explains.

“Looks very much like Musk is legally wrong.”

That leaves open the possibility that the multi-billionaire is actually trying to negotiate the price down.

This tactic has also been used successfully elsewhere, such as by LVMH: two years ago, the global luxury giant broke a deal to acquire Tiffany before getting a rebate.

But experts don’t see how Musk and Twitter could agree on a different price at this point, as the platform’s stock has lost more than a quarter of its value since late April.

“Both have a lot to lose,” Lipton said.

If Twitter wins in court, the whimsical entrepreneur will have to pay at least a few billion dollars in damages.

At worst, he could be forced to honor his commitment and buy Twitter at a price that has become exorbitant, while his fortune has eroded tens of billions of dollars in recent months.

But while that would be a victory for shareholders, it would still leave Twitter in Musk’s hands — and his libertarian vision of absolute freedom of speech does not jibe with that of many employees, users, and advertisers on whom the platform’s business model depends.

“Twitter is worse off than it was six months ago, but over the long term it’s better off without it,” said Carolina Milanesi, an analyst at Creative Strategies.

“It feels like a toy that a spoiled child wants but doesn’t really know what to do with, so they would get bored and not give them the attention they deserve and leave it in a corner … Twitter would slowly and painfully die off,” she predicts.

Any court hearings are likely to take months, especially since Musk says Lipton “is going to drag it out.”

“Twitter is in a strong position,” she says.

But Musk, followed by more than 100 million people on the platform, “will try to embarrass them — it will be distracting and demoralizing for employees,” she argues.

He has already harassed the platform with highly critical tweets, taunts and outlandish suggestions, encouraged by his many fans.

For Twitter, “it’s going to be a battle on all fronts — employees, competitors going about their business, brand issues, investors believing the numbers,” says Ives, the Wedbush analyst.

Unlike its Silicon Valley neighbors, Twitter has never been a money-making machine that could convert user attention into astronomical ad revenue.

“The last few months have been a major distraction for Twitter, preventing it from focusing on its business fundamentals,” notes eMarketer’s Debra Williamson.

“If Musk is able to complete the deal, Twitter will still have the same problems it had before it showed up,” she says.

“User growth is slowing down. And while ad revenue is still growing marginally, Twitter is now grappling with a slowing economy that could depress ad spending across all social platforms.”