What you need to know
-Elon Musk is trying to back out of his deal to buy Twitter.
– One analyst says the revelation is a disaster scenario for the company.
– Dan Ives believes this could cut its share price by a third and see employees heading for the door.
According to one analyst, the shock revelation that Elon Musk is trying to pull out of his deal to buy Twitter is a “disaster scenario” for the company that could see its share price plunge and may trigger a mass exodus of employees.
Following the revelation on Friday that Elon Musk wants to terminate his Twitter deal, analyst Dan Ives says Twitter could be in big trouble.
“This is a disaster scenario for Twitter and its Board as now the company will battle Musk in an elongated court battle to recoup the deal,” said Wedbush’s Dan Ives. Ives believes that Twitter’s stock on a standalone basis could now plunge by as much as a third to $25 when the markets open Monday. Indeed, the share price has already fallen by some 4.8%.
Ives says the $44 billion price tag set by Musk “was always a head-scratcher” and didn’t make much sense to Wall Street.
Ives told Business Insider that the news was “code red” for the company and warned that employees “could leave in droves,” with further scrutiny of the company’s metrics possibly leaving it “viewed as damaged goods.” Musk’s main objection to closing the deal is Twitter’s figures about spam and fake accounts on its platform. While he says that Twitter hasn’t given him enough information to get a clear picture, he says what he has found leads him to believe there are far more bots and fake accounts than Twitter would like us to believe, vastly reducing the value of advertising on the platform and the company as a whole.
Twitter’s Board has vowed to close the transaction at the agreed-upon price and terms and has confirmed it plans to fight Musk’s withdrawal in court.