After discussions broke off with the world's richest man, Twitter looks well positioned to win a court battle against Elon Musk over a $1 billion breakup fee and more, but the company does not look to emerge unscathed.

The entire saga has left observers baffled by what Wedbush analyst Dan Ives described as "one of the craziest business stories ever."

"I think it starts off as a circus show and it's ending as a circus show," Ives told AFP.

Musk, the founder of electric car company Tesla, sent a letter to Twitter on Friday saying he was pulling out of the controversial deal he made in April to buy the platform for $54.20 per share, or $44 billion in total.

But such merger agreements are "designed to prevent buyers from getting cold feet and deciding they want to walk away," explains Ann Lipton, a professor of law at Tulane University who specialises in corporate litigation.

Musk, who also heads SpaceX, has accused the social media giant of "false and misleading representations" about the number of fake accounts on its platform.

His lawyers also point to recent Twitter employee layoffs and hiring freezes, which they say are contrary to the company's obligation to continue operating normally.

Those arguments may be valid, but they do not merit pulling out of the deal, says Lipton, dismissing them as "nitpicky."