This is what led to the ruin of the agreement of Elon Musk and Twitter

This is how Elon Musk responded to Twitter demands 1:06

London (CNN Business) --

When Elon Musk announced his intention to buy Twitter nearly 90 days ago, the world -- and the financial markets -- were different.

The S&P 500 was 14% higher and had not yet entered a bear market.

The war in Ukraine and concerns about inflation had pushed investors to sell, but sentiment had not collapsed.

And Tesla, the electric car maker that is Musk's main source of wealth, was about to announce record profit numbers.

The mood on Wall Street and corporate America has since changed.

US stocks just ended their worst start to a year since 1970. Tesla has begun laying off workers after Musk said he had a "very bad feeling" about the economy.

The second half of the year looks uncertain at best.

• The US economy contracted 1.6% in the first quarter of 2022, raising recession fears

In this context, Musk's offer to pay $44 billion for Twitter, buying the shares he doesn't own at a price of $54.20 each, seems too high, and now, of course, he wants out of the deal. .

"The market has changed dramatically since April," Daniel Ives, a strategist at Wedbush Securities, told me.

Musk took action late on Friday to end his Twitter purchase agreement, claiming the company is "in material breach of multiple provisions" of the original deal.

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For weeks, Musk has expressed concern, without any apparent evidence, that there are a greater number of bots and spam accounts on the platform than Twitter has publicly disclosed.

Analysts speculated that the dispute was an attempt to create a pretext to get out of a deal that now seemed overpriced.

• Elon Musk and fake Twitter accounts: negotiation strategy or reason not to buy the social network?

Musk's offer represented a 54% premium to Twitter's price before Musk began increasing his stake in late January, and a 38% premium before his holdings were revealed in April.

In early July, shares of Twitter were trading at just $38.23, down almost 12% from the start of the year and almost 30% below Musk's offer price.

On the radar:

Twitter stock would probably be a lot worse off if Musk hadn't made his move.

Investors have abandoned fast-growing tech stocks, which are less attractive when interest rates rise, and social media companies have been hit hard.

Meta, from Facebook, has registered a drop of almost 50% so far this year.

Snapchat is down 68%.

Then there's Tesla stock, which Musk planned to lean on in part to fund the deal.

It's also down a lot, plummeting 30% since the beginning of April.

"The Twitter fiasco had a huge impact on Tesla stock and it's Musk's 'spoiled girl,'" Ives said.

Musk doesn't consider this inconstancy to be buyer's remorse.

But Ives thinks it's clear it was a major factor.

What will happen next:

The stage is set for a long and intense legal battle.

Twitter has said it intends to force Musk to close the sale, and it's not hard to see why.

Twitter shares are down more than 5% in pre-market trading on Monday.

With the takeover tied up in court, Ives thinks they could drop another 30% to $25.

Elon MuskTwitter