WASHINGTON, July 8 (Reuters Breakingviews) – Elon Musk started a fire under Twitter (TWTR.N) when he offered to buy the social network for $44 billion in April. Even though hes now walking away from the deal, Twitter chief Parag Agrawal can ensure the heat doesnt die out altogether.

Musks lawyer said on Friday that Twitter had breached the terms of its agreement, by not handing the Tesla (TSLA.O) boss data he said he needed to size up the social media firms fake-user problem. Predictably, Twitters board is threatening to hold him to his promises in court. While it can theoretically try to force Musk to consummate the deal, it may settle for a few billion dollars instead.

The deal was, in any case, riddled with problems from the moment Musk revealed his 9% stake in Twitter in April. He wanted to be on the companys board, and then didnt. Then he made a bid to buy the company, only to get cold feet read more , which started to weigh on Twitters shares. On Friday in after-market trading, the companys shares were 11% below their level before Musk revealed his investment. They probably have further to fall now, since Nasdaq 100 index is down around 20% over that time.


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Twitter too handled the situation poorly. The board, run by independent chair Bret Taylor and featuring co-founder Jack Dorsey, didnt take time to shop the company around, or discuss separating some potentially conflicted members from discussions. The deal it agreed allowed Musk to walk away with a relatively low break fee of $1 billion, albeit with other clauses that could restrict him.

Whatever happens, Twitter can thank Musk for pointing out some flaws in its business. It does indeed have fake users, and low operating margins compared to companies like Facebook owner Meta Platforms . Agrawal could trim research and development, which eats up more than half of the companys gross income, according to Refinitiv, yet hasnt delivered any major product innovations. He could consider testing out more subscription services, something Musk proposed.

If another bidder arises, Twitter may be more efficient, more highly valued, and better prepared to run a proper process. And any other company that gets a hastily composed takeover approach from Elon Musk will be better prepared to send him packing.

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Tesla Chief Executive Elon Musk is terminating his merger agreement to acquire Twitter for $44 billion, his lawyer said in a government filing on July 8. He said Twitter is in material breach of the agreement because the social network failed to provide data about fake accounts.

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Column by Gina Chon in Washington and Lauren Silva Laughlin in New York; Editing by John Foley and Sharon Lam

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