In Friday’s earnings release, the company said the decline in revenue reflected “ad industry headwinds associated with the macro environment as well as uncertainty related to the impending acquisition of Twitter by a subsidiary of ‘Elon Musk’.
The company did not hold a regular conference call with analysts due to ongoing litigation related to the Musk deal. Its stock fell 1.6% at the market open before recovering. It had closed Thursday at $39.52.
Musk, who is chief executive of Tesla and SpaceX, agreed to take over Twitter for $54.20 a share earlier this year. But over the next few months, he feuded with company executives, pressured the company over the number of fake users on its platform, and recently tried to back out of the deal. .
Twitter is now suing Musk to complete the acquisition. The company argues that Musk’s attempt to opt out of the deal “is invalid and unlawful, and the merger agreement remains in effect.” The company’s request for an expedited trial was granted and a trial is scheduled for October 2022, according to Friday’s statement.
The lengthy process seems to have taken its toll on Twitter. On Friday, the company reported $33 million in costs “related to the pending acquisition.”
Wedbush senior analyst Dan Ives said the results reported by Twitter are actually good news for the tech industry as a whole. While the 1% drop was unexpected, “it shows digital ad spend isn’t falling off a cliff as feared, which is positive for others in the space such as Facebook, Pinterest and Google,” Ives said.
He added that investors are considering a positive outcome for Twitter in its lawsuit with Musk. “We think Twitter clearly has the advantage legally, as the street now considers at least a major cash settlement from Musk (range $5 billion to $10 billion) or potentially Musk still buys Twitter “, Ives said in a note to investors.