How Elon Musk Left Twitter Worse Off Than He Discovered It

SAN FRANCISCO — For years, Twitter was a runner-up social media firm. It by no means grew to the scale and scale of a Fb or an Instagram. It merely muddled alongside.

Then, Elon Musk, an influence person of the service, stormed in. He provided $44 billion to purchase Twitter and declared that the corporate might carry out much better if he have been in cost. He disparaged Twitter’s executives, ridiculed its content material insurance policies, complained in regards to the product and confused its greater than 7,000 workers along with his pronouncements. As Mr. Musk revealed the corporate’s lack of enterprise and monetary prospects, Twitter’s inventory plunged greater than 30 %.

Now, as Mr. Musk, a billionaire, tries to again out of the blockbuster deal, he’s inexorably leaving Twitter worse off than it was when he mentioned he would purchase it. With every needling tweet and public taunt, Mr. Musk has eroded belief within the social media firm, walloped worker morale, spooked potential advertisers, emphasised its monetary difficulties and unfold misinformation about how Twitter operates.

“His engagement with Twitter took a extreme toll on the corporate,” mentioned Jason Goldman, a member of Twitter’s founding group who has additionally served on its board of administrators. “Staff, advertisers and the market at massive can’t have conviction in an organization whose path is unknowable and which is able to now go to courtroom to finish a transaction with a bad-faith actor.”

The precarious state of affairs underscores why Twitter is ready to sue Mr. Musk as quickly as this week to pressure a completion of the deal. The courtroom battle is more likely to be protracted and immense, involving months of pricy litigation and high-stakes negotiations by elite legal professionals. A decision is way from sure — Twitter would possibly win, however, if it loses, Mr. Musk might stroll away by paying a breakup payment. Or the 2 sides might renegotiate or settle.

On Monday, the harm that Mr. Musk, 51, has inflicted was evident. Twitter’s inventory plunged greater than 11 % to one among its lowest factors since 2020 as buyers anticipated the approaching authorized battle. Since Twitter accepted Mr. Musk’s acquisition provide, on April 25, its inventory has misplaced over a 3rd of its worth as buyers have grown more and more skeptical that the deal would get accomplished on the agreed phrases. (In distinction, the tech-heavy Nasdaq index was down about 12.5 % in the identical interval.)

Twitter declined to touch upon Monday. In a letter to Mr. Musk’s legal professionals on Sunday, the corporate’s legal professionals mentioned that his transfer to terminate the deal was “invalid and wrongful” and that Mr. Musk “knowingly, deliberately, willfully and materially breached” his settlement to purchase the agency. Twitter would proceed to supply data to Mr. Musk and to work to shut the transaction, the letter added.

Mr. Musk didn’t return requests for remark. On Sunday, the billionaire, who has cited the variety of pretend accounts on Twitter’s platform as the rationale that he can’t purchase the corporate, tweeted an image of himself laughing on the state of affairs.

Of all of the wreckage Mr. Musk is leaving at Twitter, probably the most distinguished could also be how brutally he uncovered the corporate’s waning monetary and enterprise prospects. Twitter has operated at a loss for seven of the 9 years it has been a public firm. Throughout deliberations over Mr. Musk’s provide, the corporate acquired no critical curiosity from different suitors, individuals with data of the state of affairs have mentioned. Twitter’s board decided that Mr. Musk’s provide of $54.20 a share was the very best it might get hold of, suggesting it noticed no method to attain that value by itself.

“The board’s lack of conviction within the firm’s long-term future will linger over workers, companions and shareholders whatever the consequence with Elon,” Mr. Goldman mentioned.

In current months, Twitter’s enterprise has deteriorated. Parag Agrawal, Twitter’s chief govt, mentioned in a memo to workers in Might that the corporate had not lived as much as its enterprise and monetary targets. To deal with the problems, he pushed out the heads of product and income, instituted a hiring slowdown and started an effort to draw new customers and diversify into e-commerce. In April, the corporate stopped offering a forward-looking monetary outlook to buyers, pending the acquisition.

That trajectory is unlikely to vary as uncertainty over the deal discomfits advertisers, the primary supply of Twitter’s income.

“Twitter could have hassle within the close to future reassuring skittish advertisers and their customers that they’re going to be secure,” mentioned Angelo Carusone, the president of the watchdog group Media Issues for America.

In what was an implicit dig at Twitter’s prime executives, Mr. Musk mentioned he might have accomplished approach higher with the corporate. In a presentation to buyers in Might, he mentioned he deliberate to quintuple the corporate’s income to $26.4 billion by 2028 and to succeed in 931 million customers that very same yr, up from 217 million on the finish of final yr.

Mr. Musk emphasised Twitter’s rudderless monetary path in a letter filed to the Securities and Alternate Fee on Friday. The corporate’s “declining enterprise prospects and monetary outlook” had given him pause, his legal professionals wrote, particularly contemplating Twitter’s current “monetary efficiency and revised outlook” on the fiscal yr forward.

Mr. Musk, who has greater than 100 million followers on Twitter, has additionally jackhammered the product, saying it’s not as engaging as different apps. He has repeatedly claimed, with out proof, that Twitter is overrun with extra inauthentic accounts than it has disclosed; such accounts may be automated to pump out poisonous or false content material. (The corporate has mentioned fewer than 5 % of the accounts on its platform are pretend.)

His barbs about pretend accounts have weakened belief in Twitter, simply as the corporate prepares to reasonable heated political discussions about an upcoming election in Brazil and the midterm elections this fall in america, misinformation specialists mentioned.

In one other criticism of Twitter and the way in which it supervises content material, Mr. Musk vowed to unwind the corporate’s moderation insurance policies within the title of free speech. In Might, he mentioned he would “reverse the everlasting ban” of former President Donald J. Trump from Twitter, permitting Mr. Trump again on the social community. That riled up right-wing customers, who’ve lengthy accused the corporate of censoring them, and renewed questions on how Twitter ought to deal with debates over the bounds of free speech.

Inside the corporate, worker morale has been battered, resulting in infighting and attrition, in keeping with six present and former workers.

A few of those that stay mentioned they have been relieved that Mr. Musk appeared to have determined towards proudly owning the corporate. Others shared nihilistic memes on the corporate’s Slack or overtly criticized Twitter’s board and executives for entertaining Mr. Musk’s provide within the first place, in keeping with inside messages considered by The New York Instances. The temper amongst executives was one among grim willpower, two individuals with data of their pondering mentioned.

Evan Williams, a founding father of Twitter, tweeted on Friday that he wished for an finish to Mr. Musk’s antics.

“If I used to be nonetheless on the board, I’d be asking if we are able to simply let this entire ugly episode blow over,” Mr. Williams posted in response to the announcement that Twitter meant to sue Mr. Musk and pressure the deal ahead. “Hopefully that’s the plan and that is ceremony.”

Manu Cornet, a Twitter worker, illustrated the temper with a cartoon that confirmed a shattered firm that had been got rid of a shelf by Mr. Musk’s careless elbow. His caption: “You break it, you purchase it!”

Ryan Mac and Isabella Simonetti contributed reporting.