Twitter ( NYSE: TWTR ) shares tumbled on Monday after Elon Musk said he was terminating his $44B deal to buy the embattled social network, a scenario that some analysts described as a "nightmare scenario," especially with the looming legal battle.
Wedbush Securities analyst Dan Ives, who rates Twitter ( TWTR ) shares neutral and recently lowered his price target to $30, noted that the saga, of which today is Day 1, is likely to result "in an Everest-like uphill climb" for the company and its management as it deals with employees turnover, morale, advertising headwinds, investor credibility and a number of other issues.
"That said, this is going to be a long and ugly court battle (Twitter has already hired counsel) ahead in which the fake account/bot issue will be scrutinized for all to see and casts a dark cloud over Twitter's head in the near term," Ives wrote in an investor note, adding the legal issues could last well into next year.
Twitter ( TWTR ) shares fell slightly more than 5% to $34.85 in premarket trading. Conversely, Digital World Acquisition Corp. ( DWAC ), which is set to merge with the conservative social network Truth Social, rose more than 14% to $28.10 .
In addition, Ives noted that the termination of the deal is also a "black eye moment" for Musk, given the way he handled the deal and has acted since it was announced.
JMP Securities analyst Andrew Boone said there are now "two key questions" that have arisen from the news, including whether Musk is trying to walk away entirely and what chances does Twitter ( TWTR ) have in court.
"On the second question, while Twitter is entitled to 'specific performance' in its merger agreement and we believe Twitter has a real case in court, we would expect Mr. Musk to fight any forced deal closure on multiple fronts and increasingly believe Twitter's future is independent," Boone wrote in a note to clients, adding shares are likely worth between $25 and $30 on an independent basis.
Following the news of Musk's termination, it was reported that Twitter ( TWTR ) hired law firm Wachtell, Lipton, Rosen & Katz LLP as it prepares to sue Musk, who is also the CEO of Tesla ( TSLA )over his termination of the $44 billion deal.
https://seekingalpha.com/news/3855525-twitter-said-to-hire-law-firm-to-sue-musk-over-takeover-termination
Twitter ( TWTR ) also added that it remains "committed to closing the transaction" at the agreed upon price of $54.20 a share, and that it will "pursue legal action to enforce the merger agreement" in Delaware Chancery Court.
https://seekingalpha.com/pr/18860087-twitter-board-confident-in-merger-agreement-and-intends-to-close-transaction-54_20-per-share
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Twitter tumbles as analysts says Musk terminating deal is a 'nightmare scenario'