Twitter drops 5.6% after Elon Musk walks away from $44 billion takeover bid and a legal battle brews
- Twitter stocks fell 5.6% Monday after Elon Musk pulled out of his takeover bid.
- Musk walked away from a $44 billion deal to buy Twitter Friday.
Twitter stocks tumbled 5.6% as markets opened Monday as Elon Musk's decision to walk away from his $44 billion deal to buy the company sparked a legal battle.
The social media company has now plunged 25% since April 13 - the day that Musk agreed to a takeover deal.
Musk abandoned his deal to buy Twitter in a letter filed by his lawyers with the Securities and Exchange Commission on Friday.
"Twitter has not complied with its contractual obligations," Musk's legal representatives Skadden, Arps, Slate, Meagher & Flom LLP wrote. "For nearly two months, Mr Musk has sought the data and information necessary to 'make an independent assessment of the prevalence of fake or spam accounts on Twitter's platform'."
This isn't the first time that Musk has expressed concern about the number of fake accounts on Twitter. In May, he said that the takeover deal wouldn't move forward unless he received proof that less than 5% of Twitter accounts were bots.
"We don't think Twitter will be able to provide any information that will ultimately appease Musk, as his enthusiasm towards the deal appears to be waning, likely reflecting buyer's remorse from his $44 billion proposed offer price that now appears laughable," Angelo Zino, an equity analyst at CFRA Research, said.
Twitter has already announced that it will "pursue legal action to enforce the merger agreement" and analysts said its share price will likely continue to tumble unless Musk reverses on his decision to pull out of the $44 billion deal.
"Unless Twitter is willing to reduce its offer by at least 15% to 20%, we think Musk will walk away, driving shares towards our standalone value of $26 per share," Zino said.
Meanwhile, Tesla climbed slipped 0.88% at the opening bell, having rallied 2.54% Friday after Musk abandoned his takeover bid for Twitter.