How Musk damaged Twitter, left it limping

CHENNAI: For years, Twitter was a runner-up social media company. It never grew to the size and scale of a Facebook or an Instagram. It simply muddled along. Then, Elon Musk, a power user of the service, stormed in. He offered $44 billion to buy Twitter and declared that the company could perform far better if he were in charge. He disparaged Twitter’s executives, ridiculed its content policies, complained about the product and confused its more than 7,000 employees with his pronouncements. As Musk revealed the company’s lack of business and financial prospects, Twitter’s stock plunged more than 30 percent.

Now, as Musk, a billionaire, tries to back out of the blockbuster deal, he is inexorably leaving Twitter worse off than it was when he said he would buy it. With each needling tweet and public taunt, Musk has eroded trust in the social media company, walloped employee morale, spooked potential advertisers, emphasized its financial difficulties and spread misinformation about how Twitter operates.

“His engagement with Twitter took a severe toll on the company,” said Jason Goldman, a member of Twitter’s founding team who has also served on its board of directors. “Employees, advertisers and the market at large cannot have conviction in a company whose path is unknowable and which will now go to court to complete a transaction with a bad-faith actor.”

The precarious situation underscores why Twitter is set to sue Musk as soon as this week to force a completion of the deal. The court battle is likely to be protracted and immense, involving months of expensive litigation and high-stakes negotiations by elite lawyers. A resolution is far from certain — Twitter might win, but, if it loses, Musk could walk away by paying a breakup fee. Or the two sides could renegotiate or settle.

On Monday, the damage that Musk, 51, has inflicted was evident. Twitter’s stock plunged more than 11 percent to one of its lowest points since 2020 as investors anticipated the coming legal battle. Since Twitter accepted Musk’s acquisition offer, on April 25, its stock has lost over a third of its value as investors have grown increasingly skeptical that the deal would get done on the agreed terms. (In contrast, the tech-heavy Nasdaq index was down about 12.5 percent in the same period.)

Twitter declined to comment on Monday. In a letter to Musk’s lawyers on Sunday, the company’s lawyers said that his move to terminate the deal was “invalid and wrongful” and that Musk “knowingly, intentionally, willfully and materially breached” his agreement to buy the firm. Twitter would continue to provide information to Musk and to work to close the transaction, the letter added.

Of all the wreckage Musk is leaving at Twitter, the most prominent may be how brutally he exposed the company’s waning financial and business prospects.

Twitter has operated at a loss for seven of the nine years it has been a public company. During deliberations over Musk’s offer, the company received no serious interest from other suitors, people with knowledge of the situation have said. Twitter’s board determined that Musk’s offer of $54.20 a share was the best it could obtain, 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 linger over employees, partners and shareholders regardless of the outcome with Elon,” Goldman said.