TWIT TAKES DIVE

Shares plunge 11%

Twitter shares plunged Monday in the first day of trading since Elon Musk abandoned his $44 billion agreement to buy the company — and one techindustry analyst warned of a potentially disastrous long-term scenario for the embattled social media firm.

Twitter’s stock sank 11.3% to $32.65 as investors reacted to the exit.

Musk’s move sets up a lengthy court battle likely to weigh on company shares for months or years to come and added to the challenges facing CEO Parag Agrawal, Wedbush analyst Daniel Ives said.

“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 [a] host of other issues abound,” Ives said.

Musk’s team argued in a filing last Friday detailing his decision to renege on the deal that Twitter had repeatedly failed to provide accurate information about the number of spam bots in its user base.

Twitter sent a letter to Musk saying his effort to abandon his takeover is “invalid and wrongful” and Twitter hasn’t breached any of its obligations.

Long fight ahead

Investors are likely to price in the possibility of a court battle resulting in a victory for Twitter, whether through a sale at a different price to Musk or through recouping a $1 billion breakup fee included in the original takeover agreement, according to Ives.

“That said, 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.

Bloomberg columnist Matt Levine noted the possibility that Musk could refuse to buy Twitter even if a Delaware court orders him. That, in turn, could start a saga that raises questions about the court’s authority — a scenario a judge will likely seek to avoid.

Wedbush has a 12-month price target of $30 for Twitter shares — below the roughly $33 threshold at which the company’s stock currently trades.