SAN FRANCISCO — For years, Twitter was a second-tier social media company. It never grew to the size and scale of Facebook or Instagram. He just got confused.
Then Elon Musk, a power user of the service, barged in. He offered $44 billion to buy Twitter and stated that the company could run much better if he were in charge. He disparaged Twitter executives, ridiculed their content policies, complained about the product and misled its more than 7,000 employees with his pronouncements. When Musk revealed the company’s lack of business and financial prospects, Twitter shares 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 stinging tweet and public taunt, Musk has eroded trust in the social media company, battered employee morale, spooked potential advertisers, highlighted his financial struggles and spread misinformation about how Twitter operates.
“His commitment to Twitter severely affected the company,” said Jason Goldman, a member of Twitter’s founding team who also served on its board of directors. “Employees, advertisers and the market in general cannot be convinced by a company whose path is unknown and which will now go to court to complete a transaction with an actor in bad faith.”
The precarious situation underscores why Twitter will sue Musk as soon as this week to force completion of the deal. The court battle is likely to be protracted and immense, involving months of costly litigation and high-stakes negotiations by elite lawyers. A resolution is far from certain: Twitter could win, but, if it loses, Musk could walk away paying a breakup fee. Or the two sides could renegotiate or reach an agreement.
On Monday, the damage that Mr. Musk, 51, has inflicted was evident. Twitter shares fell more than 11 percent to one of their lowest points since 2020 as investors anticipated the upcoming legal battle. Since Twitter accepted Musk’s takeover offer on April 25, its shares have lost more than a third of their value. as investors have become increasingly skeptical that the deal will go through on agreed terms. (In contrast, the tech-heavy Nasdaq index fell 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 their decision to terminate the deal was “invalid and unlawful” and that Musk “knowingly, intentionally and materially breached” their agreement to buy the firm. Twitter would continue to provide information to Mr. Musk and work to close the transaction, the letter adds.
Musk did not respond to requests for comment. On Sunday, the billionaire, who 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 debris Musk is leaving behind on Twitter, the most prominent may be the brutality with which he exposed the company’s dwindling business and financial 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 did not receive any serious interest from other stakeholders, people with knowledge of the situation said. Twitter’s board determined that Musk’s offer of $54.20 per share was the best he could get, suggesting he didn’t see a way to reach that price on his own.
“The board’s lack of conviction in the company’s long-term future will persist with employees, partners and shareholders, regardless of the outcome with Elon,” Goldman said.
In recent months, Twitter’s business has deteriorated. Parag Agrawal, Twitter’s chief executive, said in a memo to employees in May that the company had failed to meet its business and financial goals. To address the problems, he ousted product and revenue heads, instituted a hiring slowdown and began an effort to attract new users and diversify into e-commerce. In April, the company stopped providing a prospective financial outlook to investors, pending the acquisition.
That trajectory is unlikely to change as uncertainty over the deal unsettles advertisers, Twitter’s main source of revenue.
“Twitter will have trouble in the near future reassuring skittish advertisers and their users that it will remain stable,” said Angelo Carusone, president of the watchdog group Media Matters for America.
In what was an implied jab at Twitter’s top executives, Musk said he could have done much better with the company. In a presentation to investors in May, he said he planned to quintup the company’s revenue to $26.4 billion by 2028 and reach 931 million users that same year, up from 217 million at the end of last year.
Musk emphasized Twitter’s rudderless financial direction in a letter filed with the Securities and Exchange Commission on Friday. The company’s “declining business outlook and financial outlook” had given him pause, his lawyers wrote, especially given Twitter’s recent “financial performance and revised outlook” for the fiscal year ahead.
Musk, who has more than 100 million followers on Twitter, also criticized the product, saying it’s not as attractive as other apps. He has repeatedly claimed, without evidence, that Twitter is overrun with more fake accounts than he has revealed; such accounts can be automated to generate toxic or fake content. (The company has said that less than 5 percent of accounts on its platform are fake.)
His criticism of fake accounts has undermined trust in Twitter, just as the company prepares to moderate heated political discussions about the upcoming election in Brazil and this fall’s midterm elections in the United States, disinformation experts said.
In another criticism of Twitter and the way it monitors content, Musk vowed to dismantle the company’s moderation policies in the name of free speech. In May, he said he would “reverse the permanent ban” on former President Donald J. Trump from Twitter, allowing him to return to 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 limits on free speech.
Within the company, employee morale has suffered, leading to infighting and attrition, according to six current and former employees.
Some of those who remained said they were relieved that Musk seemed to have decided not to own the company. Others shared nihilistic memes on company Slack or openly. criticized Twitter’s board of directors and executives for considering Musk’s offer in the first place, according to internal messages seen by The New York Times. The mood among executives was one of grim determination, two people with knowledge of his thinking said.
Evan Williams, one of the founders of Twitter, tweeted Friday that he wanted an end to Musk’s antics.
“If I were still on the board, I’d ask if we can just let this whole ugly episode go away,” Williams posted in response to the announcement that Twitter intended to sue Musk and force the deal. “Hopefully that’s the plan and this is the ceremony.”
Manu Cornet, Twitter employee, illustrated the mood with a cartoon showing a wrecked company that had been knocked off a shelf by Musk’s careless elbow. His subtitle: “You break it, you buy it!”
Ryan MacY Isabella Simonetti contributed report.