Twitter Inc shares fell about 6% in premarket trading on Monday, as a legal battle between Elon Musk and the social media company is expected to take center stage after the world’s richest person backed out of the $44 billion deal.

Musk, the CEO of Tesla Inc, announced on Friday that he was terminating his deal to buy Twitter because the company had violated multiple provisions of the merger agreement. more info

According to people familiar with the situation, Twitter plans to sue Musk as soon as this week to force him to complete the acquisition. more info

Musk hit back at Twitter’s stance on Monday, tweeting that the legal battle would force the company to reveal information about bots and spam accounts in court. (https://bit.ly/3uCUPvd)

Musk’s tweets were his first public response since the announcement on Friday.

Twitter shares closed at $36.81 on Friday, a 32% discount to Musk’s $54.20 offer, as they were hit by a double whammy of a drop in the broader equity market and investor skepticism about the deal.

“We believe that Elon Musk’s intentions to terminate the merger are more based on the recent market sell-off than… Twitter’s ‘failure’ to comply with his requests,” Jefferies analyst Brent Thill said in a note.

“In the absence of a deal, we would not be surprised to see the stock find a floor at $23.5.”

The contract stipulates for Musk to pay Twitter a $1 billion break-up fee if he is unable to complete the transaction due to factors such as purchase finance falling through or regulatory obstacles. The break-up fee, however, would not apply if Musk terminated the agreement on his own.

Source: Reuters

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