(Bloomberg) – Elon Musk’s attempt to back out of a deal to buy Twitter Inc. has made the social media service worse, no matter how it turns out.
If Tesla’s chief executive succeeds in closing the deal, Twitter’s stock could go into free fall, and employees already frustrated by Musk’s months-long public criticism would suffer another emotional blow. If Twitter prevails in court, the company will be run by an unpredictable and reluctant owner while still struggling to meet ambitious growth targets.
Musk’s Friday filing with regulators announcing plans to abandon the $44 billion acquisition has sparked a nightmare for Twitter, where only bad options remain. Chairman Bret Taylor responded by vowing to enforce the deal in court, but after months of uncertainty and pressure, the company’s leadership has lost the trust of its employees.
Many of Twitter’s employees were already worried about the impact of Musk’s arrival. During a question-and-answer session he held with Twitter employees in June, some mocked Musk’s internal channels of inactivity as he told them that only those “special” people could continue to work from home. In the weeks leading up to the session, others worried that Musk didn’t know how to run a social network, and others voiced their displeasure over allegations that Musk had sexually harassed former employees of his rocket company, SpaceX. After Twitter leadership failed to acknowledge the allegations, one employee wrote, “As a woman who works at Twitter, I find the radio silence very frustrating.”
Those sentiments were directed at Musk when employees believed he still wanted to buy the company. His change of heart only fueled frustration with Musk, as well as Twitter’s management and board, which some employees openly mocked on Twitter – despite an internal directive not to talk publicly about the deal, according to a person familiar with the matter.
The person familiar with the matter said employees are also on edge due to recent executive departures and a reorganization of product leadership that has made product development more difficult. twitter laid off about 100 employees this week, and employees expect more to come.
“If Musk is able to terminate the deal, Twitter will still face the same problems it faced before he emerged,” wrote Debra Aho Williamson, principal analyst at Insider Intelligence. “Its user growth is slowing. While ad revenue is still growing modestly, Twitter is now dealing with an economic slowdown that could squeeze ad spending on all social platforms.”
If Twitter goes to court but fails to force Musk to buy the San Francisco-based company, he will likely sell his 9 percent stake and walk away. Twitter’s stock price — which has yet to reach the $54.20 per share Musk agreed to pay — will undoubtedly fall well below Friday’s close. -will undoubtedly be well below Friday’s closing price of $36.81. After months of anticipated deals, Twitter will suddenly be back to where it was when Musk showed up at its doorstep in April.
That’s probably not a good place to be. When Musk made his offer, Twitter’s business looked suspect. The company had set high user growth and revenue goals for 2023, and user goals were becoming more ambitious with each new quarter. Since Musk’s offer, Twitter has also imposed a hiring freeze, fired two executives and laid off employees.
The Twitter-Musk saga is not over yet. Musk will try to prove that Twitter violated their merger agreement, and Twitter will try to prove that it met its obligations. Musk and Twitter may renegotiate the price, or Musk may walk away but pay a hefty settlement to Twitter.
Despite Musk’s claims, the deal isn’t over. But as far as Twitter’s options are concerned, it might as well be.