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PRETORIA – Twitter shares tumbled in pre-market trading after Elon Musk walked away from his US$44 billion deal to buy the company, setting the scene for a disruptive legal battle.

Shares fell as much as 7.8 per cent to US$33.93 in pre-market trading yesterday, on track to erase US$2.2 billion in market value, after Musk backed out of an agreement to buy the social media giant and take it private. Shares in Tesla, the electric carmaker that Musk leads, rose 1.1 per cent.

Twitter shares have been trading well below the US$54.20-per-share offer Musk made in April. The billionaire alleges that Twitter misrepresented user data, with the number of spam bots on the platform much higher than the company had disclosed. The stock has also been falling along with the tech sector amid rising interest rates.

Abandon

“It’s not a huge surprise to anyone that Musk is trying to abandon the deal,” said Vital Knowledge Founder Adam Crisafulli. “The problem, though, is that this whole saga was probably quite disruptive over the last few months, which could weigh on Twitter’s performance not only in the second quarter, but third quarter, too.” With a US$1 billion breakup fee on the line, traders are bracing for more chaos as Twitter takes Musk to court.

Twitter chairperson Bret Taylor said the company would pursue legal action to close the transaction ‘on the price and terms agreed by Mr Musk’. The company has hired merger-law heavyweight Wachtell, Lipton, Rosen & Katz and aims to file a suit early this week, according to people familiar with the company’s plans, who asked not to be identified because the matter is private.