SAN FRANCISCO — For years, Twitter was the runner-up in social media. It never grew to the size and scale of Facebook or Instagram. It just went wrong.
Then Elon Musk, a power user of the service, swooped in. He offered $44 billion to buy Twitter and said the company could perform much better if he were at the helm. He dissed Twitter executives, ridiculed its content policies, complained about the product and confused more than 7,000 employees with his statements. After Mr. Musk revealed the company’s lack of business and financial prospects, Twitter shares fell more than 30 percent.
Now, as Mr. Musk, a billionaire, tries to walk away from the blockbuster deal, he is inexorably leaving Twitter in a worse position than it was when he said he would buy it. With every surprise tweet and public taunt, Mr. Musk undermines the social media company’s credibility, undermines employee morale, scares away potential advertisers, highlights financial difficulties and spreads misinformation about how Twitter works.
“His engagement with Twitter has had a profound impact on the company,” said Jason Goldman, a member of Twitter’s founding team who also served on its board of directors. “Employees, advertisers and the market as a whole cannot be persuaded by a company whose path is unknown and which will now go to court to complete a transaction with a bad actor.”
The uncertain situation underscores why Twitter is poised to sue Mr. Musk as early as this week to force the deal to go through. The legal battle is likely to be protracted and overwhelming, involving months of expensive litigation and high-stakes negotiations by elite lawyers. The decision is far from certain – Twitter could win, but if it loses, Mr Musk could walk away, paying a break-up fee. Or the two sides could renegotiate or reach an agreement.
On Monday, the damage the 51-year-old Musk had done was evident. Shares of Twitter fell more than 11% to one of their lowest points since 2020 as investors anticipated the upcoming legal battle. Since Twitter accepted Mr. Musk’s takeover offer on April 25, its shares have lost more than a third of their value as investors have grown increasingly skeptical that the deal will go through on the agreed terms. (In contrast, the Nasdaq tech index fell about 12.5 percent over the same period.)
Twitter declined to comment Monday. In a letter to Mr. Musk’s lawyers on Sunday, the company’s lawyers said its move to terminate the deal was “invalid and unlawful” and that Mr. Musk had “knowingly, willfully, willfully and materially breached” his agreement to purchase of the company. Twitter will continue to provide information to Mr. Musk and work to close the deal, the letter added.
Mr. Musk did not respond to requests for comment. On Sunday, the billionaire, who cited the number of fake accounts on the Twitter platform as a reason he couldn’t buy the company, tweeted a photo of himself laughing at the situation.
Of all the debris Mr. Musk leaves behind on Twitter, perhaps the most famous is how brutally he laid out the company’s dwindling financial and business prospects. Twitter has operated at a loss for seven of the nine years it has been a public company. While discussing Mr. Musk’s bid, the company had not received serious interest from other suitors, people familiar with the situation said. Twitter’s board decided that Mr. Musk’s offer of $54.20 a share was the best it could get, suggesting it saw no way to reach that price on its own.
“The board’s lack of conviction in the company’s long-term future will remain with employees, partners and shareholders regardless of the outcome with Elon,” Mr. Goldman said.
In recent months, Twitter’s business has deteriorated. Parag Agrawal, Twitter’s chief executive, said in a memo to employees in May that the company had not met its business and financial goals. To deal with the problems, he ousted product and revenue executives, instituted a hiring freeze and began efforts to attract new users and diversify into e-commerce. In April, the company stopped providing a forward-looking financial outlook to investors pending the acquisition.
That trajectory is unlikely to change as uncertainty surrounding the deal worries advertisers, Twitter’s main source of revenue.
“Twitter will have trouble in the near future assuring reticent advertisers and their users that they will be stable,” said Angelo Carusone, president of the watchdog group Media Matters for America.
In what was an implicit dig at Twitter’s top executives, Mr. Musk said he could have done much better with the company. In a presentation to investors in May, he said he plans to quintuple the company’s revenue to $26.4 billion by 2028 and reach 931 million users that year, up from 217 million at the end of last year.
Mr. Musk highlighted Twitter’s uncontrolled financial management in a letter filed with the Securities and Exchange Commission on Friday. The company’s “deteriorating business outlook and financial outlook” prompted it to stop, its lawyers wrote, especially given Twitter’s recent “financial performance and revised outlook” for the upcoming fiscal year.
Mr Musk, who has more than 100 million followers on Twitter, also slammed the product, saying it was not as attractive as other apps. He has repeatedly claimed, without evidence, that Twitter is flooded with more inauthentic accounts than it has disclosed; such accounts can be automated to pump out toxic or false content. (The company said less than 5 percent of accounts on its platform are fake.)
His words about fake accounts have weakened Twitter’s credibility, just as the company prepares to tone down heated political discussions about the upcoming elections in Brazil and this fall’s midterm elections in the United States, disinformation experts said.
In another criticism of Twitter and the way it polices content, Mr. Musk vowed to roll back the company’s moderation policies in the name of free speech. In May, he said he would “repeal the permanent ban” on former President Donald J. Trump from Twitter, allowing Mr. Trump to return to the social network. That angered right-wing users who have long accused the company of censoring them, and renewed questions about how Twitter should handle debates about the limits of free speech.
Inside the company, employee morale has suffered, leading to infighting and burnout, according to six current and former employees.
Some of those who remain said they were relieved that Mr. Musk appeared to have decided not to own the company. Others shared nihilistic memes on the company’s Slack or openly criticized Twitter’s board and executives for entertaining Mr. Musk’s proposal in the first place, according to internal communications reviewed by The New York Times. The mood among executives was grimly determined, said two people familiar with their thinking.
Evan Williams, the founder of Twitter, tweeted on Friday that he wanted an end to Mr. Musk’s antics.
“If I were still on the board, I would ask if we could just let this whole ugly episode end,” Mr. Williams posted in response to the announcement that Twitter intended to sue Mr. Musk and force the deal to go ahead. “Hopefully that’s the plan and it’s a ceremony.”
Manu Cornett, a Twitter employee, illustrated the sentiment with a cartoon that showed a broken company being pushed off the shelf by Mr. Musk’s careless elbow. His caption: “You break it, you buy it!”
Ryan Mack and Isabella Simonetti contributed reporting.
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