SAN FRANCISCO — For years, Twitter was the number two social media company. It never grew to the size and scale of a Facebook or an Instagram. It just messed up.
Then Elon Musk, a power user of the service, burst in. He offered $44 billion to buy Twitter, stating that the company would perform much better if he was in charge. He despised Twitter executives, ridiculed content policies, complained about the product and confused its 7,000-plus employees with his statements. When Mr. Musk revealed the company’s lack of business and financial prospects, Twitter’s stock plunged more than 30 percent.
With billionaire Mr. Musk trying to pull out of the blockbuster deal, he’s leaving Twitter inexorably worse off than it was when he said he’d buy it. With every nasty tweet and public ridicule, Mr. Musk has eroded trust in the social media company, boosted employee morale, frightened potential advertisers, highlighted its financial difficulties and spread misinformation about how Twitter works.
“His involvement with Twitter has taken a heavy toll on the company,” said Jason Goldman, a member of Twitter’s founding team and also a member of its board of directors. “Employees, advertisers and the market at large cannot have any conviction in a company whose path is unknown and which will now go to court to close a transaction in bad faith.”
The precarious situation underscores why Twitter will sue Mr. Musk this week to force a closing of the deal. The legal battle is likely to be protracted and immense, with months of costly lawsuits and high-stakes negotiations by elite lawyers. A solution is far from certain – Twitter could win, but if it loses, Mr. Musk could walk away by paying a termination fee. Or the two sides can renegotiate or settle.
On Monday, the damage inflicted on Mr. Musk, 51, was apparent. Shares of Twitter fell more than 11 percent 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, the stock has lost more than a third of its value as investors have become increasingly skeptical whether the deal would be executed on the terms agreed upon. (The technology-heavy Nasdaq index, on the other hand, fell about 12.5 percent over the same period.)
Twitter declined to comment on Monday. In a letter to Mr. Musk’s attorneys on Sunday, the company’s attorneys said his attempt to end the deal was “void and unlawful” and that Mr. Musk “knew, intentionally, intentionally and materially” his agreement to terminate the deal. to buy company, has violated. Twitter would continue to provide information to Mr. Musk and work towards closing the transaction, the letter added.
Mr. Musk has not returned requests for comment. On Sunday, the billionaire, who has cited the number of fake accounts on the Twitter platform as the reason he can’t buy the company, tweeted a photo of himself laughing at the situation.
Of all the wreckage Mr. Musk has left on Twitter, perhaps the most notable is how brutally he exposed the company’s waning financial and business prospects. Twitter has operated at a loss seven of the nine years that it has been a publicly traded company. During deliberations about Mr. Musk’s offer, the company did not get any serious interest from other suitors, people with knowledge of the situation said. The board of Twitter determined that Mr. Musk’s offer of $54.20 a share was the best it could get, suggesting it saw no way to hit that price on its own.
“The board’s lack of conviction about the company’s long-term future will linger with employees, partners and shareholders regardless of the outcome with Elon,” said Mr. Goldman.
In recent months, Twitter’s business has deteriorated. Twitter CEO Parag Agrawal said in a memo to employees in May that the company had failed to meet its business and financial goals. To address the issues, he pushed the heads of product and revenue, instituted a staff slowdown, and began an effort to attract new users and diversify into e-commerce. In April, the company stopped providing forward-looking financial statements to investors pending the acquisition.
That trajectory is unlikely to change as uncertainty over the deal puts advertisers, the main source of Twitter’s revenue, in the wrong.
“Twitter will struggle for the foreseeable future to reassure skittish 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 implied dig at Twitter’s top executives, Mr. Musk said he could have done a lot better with the company. In a presentation to investors in May, he said he plans to increase the company’s revenue fivefold to $26.4 billion by 2028 and reach 931 million users that same year, up from 217 million at the end of last year.
Mr. Musk highlighted Twitter’s rudderless financial direction in a letter filed Friday with the Securities and Exchange Commission. The company’s “declining business outlook and financial outlook” had given him a break, his lawyers wrote, especially given Twitter’s recent “financial performance and revised outlook” for the coming fiscal year.
Mr. Musk, who has more than 100 million followers on Twitter, has also hacked the product, saying it isn’t as attractive as other apps. He has repeatedly claimed, without proof, that Twitter is inundated with more inauthentic accounts than it has revealed; such accounts can be automated to pump out toxic or fake content. (The company has said that less than 5 percent of accounts on its platform are fake.)
His comments about fake accounts have weakened trust in Twitter just as the company prepares to moderate heated political discussions about Brazil’s upcoming elections and the United States’ midterm elections this fall, disinformation experts say.
In another critique of Twitter and the way it oversees content, Mr. Musk vowed to call off the company’s moderation policy in the name of free speech. In May, he said he would undo former President Donald J. Trump’s “permanent ban” from Twitter, which could allow Mr Trump to get back on 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.
Employee morale has been affected within the company, leading to infighting and attrition, according to six current and former employees.
Some of those left behind said they were relieved that Mr. Musk appeared to have decided not to own the company. Others shared nihilistic memes on company Slack or openly criticized Twitter’s board and executives for receiving Mr. Musk in the first place, according to internal reports viewed by The New York Times. The mood among executives was one of grim determination, said two people knowledgeable about their thinking.
Evan Williams, one of the founders of Twitter, tweeted Friday that he wanted to end Mr Musk’s antics.
“If I was still on the board I’d ask if we could just let this whole ugly episode blow over,” Mr Williams posted in response to the announcement that Twitter planned to sue Mr. Musk and cancel the deal. force. “Hopefully that’s the plan and this is the ceremony.”
Manu Cornet, a Twitter contributor, illustrated the mood with a cartoon showing a shattered company knocked off a shelf by Mr. Musk’s careless elbow. His caption: “You break it, you buy it!”
Ryan Mac and Isabella Simonetti reporting contributed.
