In this photo illustration, Elon Musk’s Twitter account is seen on a smartphone screen with the Twitter logo in the background.
Pavlo Gonchar | Lightrocket | Getty Images
Shares of Twitter sank in premarket trading on Monday after Elon Musk said he was trying to pull off a $44 billion acquisition of the company.
Shares of the social media platform were down 5% in premarket US trading, a loss of nearly $1.4 billion in market value from Friday’s closing price. Tesla, where Musk is CEO, was slightly higher.
On Friday, Musk’s lawyer notified Twitter’s board that he wanted to cancel the deal. The billionaire has taken issue with the number of bots and fake accounts on Twitter and says the company is not being truthful about how much activity on the service is authentic.
Twitter, on the other hand, says it has given Musk the information it needs to evaluate its claim that spam accounts make up only 5% of monetizable daily active users, including the so-called firehose, an unfiltered stream of daily messages real time tweets.
Brett Taylor, Twitter’s chairman, said the company would file legal action in Delaware’s Chancery Court to enforce the settlement.
Musk responded on Monday by posting a meme mocking Twitter management for the failed deal. It includes images of a laughing Musk along with text claiming the company is trying to “force” him to buy it in court.
A Twitter spokesperson declined to comment on the meme.
The two sides are likely set for a lengthy legal battle, according to lawyers. Musk could also face paying a $1 billion separation fee to leave.
Musk is one of the most popular Twitter users with more than 100 million followers. He has used the social media site for everything from corporate communications for his various companies to criticizing the platform itself, which he previously sought to acquire, because of hurdles with its content rules and fake accounts.
Richard Windsor, founder of research firm Radio Free Mobile, said Musk’s willingness to “significantly renegotiate” the $54.20 price he agreed to pay for Twitter was likely the reason he pulled out of the deal.
As of Friday, Twitter shares were worth 32% less than Musk’s agreed-upon deal price. Although Windsor is not a shareholder in Twitter, he said that if he was, he would sell now.
“There’s still a disconnect between the fundamentals and the share price,” Windsor told CNBC’s “Squawk Box Europe” on Monday.
“If you look at where the tech sector has come in the last few months, you could put Twitter’s valuation somewhere between $13 [billion] to $15 billion, which is about 50% below even the stock price today.”