Looming Musk-Twitter Legal Battle Will Hit Tesla

Twitter shares fell more than 6% before the opening bell Monday after billionaire Elon Musk said that he was withdrawing his $44 billion bid for the firm, and the social media network pledged to sue Musk in court to enforce the deal, the Associated Press (AP) reported.

Photo Insert: Twitter shares have fallen below $35 per share, much below the $54.20 that Musk agreed to pay for the company, showing that Wall Street has severe questions about the deal's viability.

Musk claimed on Friday that Twitter has failed to disclose sufficient information regarding the number of fraudulent accounts. When Musk raised the matter again last month after declaring his intention to buy the social media network, Twitter said it was providing him with a "firehose" of raw data on hundreds of millions of daily tweets.

According to a study firm, Musk's Twitter account has 70% phony followers, far more than other accounts with larger followings, which average 41%.

Twitter has stated in regulatory papers for years that it believes approximately 5% of the accounts on its network are fraudulent, but Musk continued to mock the firm on Monday, using Twitter, over what he has portrayed as a lack of data.

As part of the buyout agreement, Musk committed to a $1 billion breakup fee, but it looks that Twitter CEO Agrawal and the company are preparing for a legal battle to force the sale.

The court case will also have an impact on Tesla which is plagued by hundreds of complaints about the poor quality of its electric vehicles, as well as malfunctioning electronics and auto-pilot systems that have been involved in over 400 car accidents with some leading to fatalities.

“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,” Wedbush analyst Dan Ives, who follows the company, wrote Monday.

Twitter shares have fallen below $35 per share, much below the $54.20 that Musk agreed to pay for the company. This strongly shows that Wall Street has severe questions about the deal's viability.

“This is going to be a long and ugly court battle (Twitter has already hired counsel) ahead in which the fake account/bot issue will be scrutinized for all to see and casts a dark cloud over Twitter’s head in the near term,” Ives said.

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