Luffy offered Kid to form an alliance against Kaido. Kid rejected the offer by stating that he was betrayed by his former allies Basil Hawkins and Scratchmen Apoo, and they rather fight Kaido by themselves. He also blamed the betrayal of his former allies as the cause of Killer’s suffering after eating a faulty SMILE. Kid and Killer free themselves and leave the prison to find their other members.
The panel is confusing and causes confusion given that the first statement being “Are you going to fight Kaido again?” appears over Kid’s head and thus leads one to corresponding that statement with Kid.
The issue with that is if Kid were asking Luffy that in conjunction with the following retort being “Absolutely not…look what he did to my partner”, there’s no other way to interpret that other than concluding he’s done with Kaido and wants no part of him.
When read from the stand-point that the one asking to fight Kaido again is Luffy, the scene has a different meaning. Kid reinforces that he will indeed fight Kaido given what he’s seen being done to Killer, but without intentions of forming any sort of alliance.
The arrangement of the dialogue bubbles is what causes the confusion and gives the misleading impression that Kid has had his spirit broken.
*Theory by HPsyche
