30 ms·

Musk SEC Filing

139 points by jbegley 4y ago

jeffrallen 4y ago
I wonder if this was actually his plan all along: use the attempted acquisition to bring a spotlight onto the fake accounts thing? Whacky.
ru552 4y ago
He's going pretty hard on the 5% fake accounts that Twitter reported. I would probably do the same if I were in his position.
- sabertoothed 4y ago
  I admire Elon Musk as a visionary and engineer. But here, I think, he is just trying to get out of the deal. The high percentage of bots was exactly the reason why he wanted to buy Twitter in the first place. Because removing the bots would have been a relatively straight-forward way of increasing Twitter's valuation. IIRC he even tweeted about it. [See my clarification below in a comment]
  - sabertoothed 4y ago
    On another note, isn't it amazing how well Twitter hides its advanced search functionality? I still don't understand if it is incompetence or deliberate.
  - A4ET8a8uTh0 4y ago
    Yes, but sufficiently high amount could potentially mean lower price. So it serves as a way to keep his options open and an indication to counter-party that he could just walk away. As much as Elon annoys me, it hard for me to say he does not know what he is doing. Even the WFH tweet was timed seemingly to lower the cost of severance payments from announced 10% workforce reduction.
    - sabertoothed 4y ago
      I am not saying what he is doing right now isn't rational. I think it's totally rational. He now has the chance of lowering the price or even abandoning the deal. (I just don't believe him regarding the bots. He always knew bots are a problem and likely under-reported.)
    - enragedcacti 4y ago
      How does him reversing the 10% reduction days later play into the master plan? https://www.carscoops.com/2022/06/elon-musk-backtracks-on-tesla-job-cuts-says-total-workforce-will-grow/ https://www.carscoops.com/2022/06/elon-musk-backtracks-on-te...
      - A4ET8a8uTh0 4y ago
        I will genuinely rather wait for more leaks of emails from the factory than try to divine the meaning behind tweets. That said, if the message is confusing then either messenger does not know what he is doing or wants the confusion. In his case, I think the latter is more likely.
  - specialp 4y ago
    He might actually have to make this deal. I thought for a while that he had no intention of actually buying them. He just wanted to stir the pot with Twitter. He would then back out, and say something like "Taking these funds and now putting them towards a moon base to mine helium 3 operational by 2023" and people would eat it up. But I think now that it didn't work the way he planned, and now his credibility and ability to make sound judgements is being questioned by many.
  - HL33tibCe7 4y ago
    Visionary? Maybe. Engineer? Meh. I think he's first and foremost an entrepreneur, and people overstate his engineering ability. In many cases, he shows total ignorance for the realities of engineering (see e.g: hyperloop). I suspect in those cases he is just surrounded by yes-men who don't want to tell him he's wrong. In general, I get the impression that his success over the years has been contingent on the people he has surrounded himself with. That, in itself, is a skill, though, granted.
  - Someone1234 4y ago
    > I admire Elon Musk as a [.] engineer. Engineer? What exactly has Musk ever engineered? You could maybe argue "designer" but even that may be generous.
    - scoopertrooper 4y ago
      > What exactly has Musk ever engineered? A public persona that he's now diligently working to destroy?
    - _jal 4y ago
      Finance.
  - mrandish 4y ago
    He might just be trying to reprice the deal at a lower price he now thinks is commensurate to the value. Things were necessarily rushed in the initial agreement due to leaks etc. He and his team have now had time to develop an operating plan. Keep in mind that there are several savvy hedge funds also investing in this deal and this may be driven by their concerns. There's also a possibility he'd just like to ensure the deal closes in a certain later time window. The composition of his personal wealth is complex and highly dependent on his equity holdings which have grown volatile recently.
  - mrandish 4y ago
    He might just be trying to reprice the deal at a lower valuation he thinks is commensurate to the potential. Things were necessarily rushed in the initial agreement due to leaks etc. He and his team have now had time to develop an operating plan. Keep in mind that there are several hedge funds also co-investing in this deal and this may be driven by their concerns. There's also a possibility he'd just like to ensure the deal closes in a certain later time window. The composition of his personal wealth is complex and highly dependent on his equity holdings which have grown volatile recently.
  - sixQuarks 4y ago
    Wow, look at the emotional anti-Elon bias in here. Just because you said you admire him as a visionary and engineer. You actually disagree with him, but just the fact that you admire him triggers people.
    - sabertoothed 4y ago
      It’s sad that there is little space for nuanced, intellectual discourse. Tribalism and polarisation rule.
      - sixQuarks 4y ago
        What's sadder is that it's happening on HN, one of the last vestiges of good online intellectual discussions.
      - dubswithus 4y ago
        Sometimes dishonesty and general sleaziness overrides personal accomplishments.
- acallan 4y ago
  Why wasn't this part of his due diligence before contractually obligating himself to purchase Twitter?
  - xeromal 4y ago
    I don't know much about this specific situation, but isn't it pretty normal to lock in a price for purchase contingent on everything checking out. It's not like you can go digging around in their databases looking for bot accounts until you have official access. EDIT: Clearly people feel strongly about this so feel free to look at the comments below for some great answers. I'd ask for you to read before commenting though. I keep getting emails rehashing similar things.
    - canucklady 4y ago
      He explicitly waived any kind of due diligence, which is when you would normally agree to a price and make a conditional offer. His offer was unconditional.
      - xeromal 4y ago
        lol, that not a bright move. Hopefully someone hold's his feet to the fire.
    - nightpool 4y ago
      No, the whole point of the pre-merger negotiations is to grill the company on that kind of stuff before locking in the price. you don't get "official access" to anything until you've actually finished the transaction and paid for the company (partially for "don't string us along" reasons and partially for antitrust/collusion reasons). Musk decided to rush into this deal with very little negotiations and while waiving the standard due diligence, and now he's bored with it and creating a pretext to get himself out of it. It's insane to believe he really cares about the bot problem—fixing the problem of "too many bots in his mentions" was one of the reasons he bought the company to begin with!
    - parmenidean 4y ago
- mikeyouse 4y ago
  It's just silly though -- he complained relentlessly about the bots before he made what was am unconditional offer to buy the company. Twitter hasn't changed their definition of bot in the past decade, they have repeatedly emphasized that they count them in a unique and specific way, and they detailed that methodology (it's not 5% of accounts - it's 5% of "monetizable daily active users"[1]). He has no legal leg to stand on, in a 'legally just' world, he'd be forced to buy Twitter for the price he initially offered. There's a good chance that the entire process would annoy everyone to death, so they may not try and force him to buy a company he no longer wants, but they'd be well within their contractual rights to do so. [1] From their 2022 10K: We define mDAU as people, organizations, or other accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com, Twitter applications that are able to show ads, or paid Twitter products, including subscriptions. Average mDAU for a period represents the number of mDAU on each day of such period divided by the number of days for such period. Changes in mDAU are a measure of changes in the size of our daily logged in or otherwise authenticated active total accounts. To calculate the year-over-year change in mDAU, we subtract the average mDAU for the three month sended in the previous year from the average mDAU for the same three months ended in the current year and divide the result by the average mDAU for the three months ended in the previous year. Additionally, our calculation of mDAU is not based on any standardized industry methodology and is not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies. Similarly, our measures of mDAU growth and engagement may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology.
  - omarhaneef 4y ago
    I think this is the right approach: zoom in on the language and discuss what is at stake. So let's talk about the legal leg to stand on part. From his 13d language (amendment #8, filed June 6th, which is public, but I read it on bloomberg and can't find the link to the gov site this second) it doesn't sound like he has an issue with the definition. He wants to rerun the numbers and see for himself. He is asking for the underlying data. Twitter pushed back to say that is not in the scope of what was asked for (apparently, based on his letter). Not taking sides because I was not in the negotiations and know nothing about what each side, indicated, what the legal contract says and so forth. Just saying, the issue is whether they should provide the data for him to run his own calculations.
- rco8786 4y ago
  Except he very deliberately put himself in this position. Twitter has reported 5% as the bot count for years, it’s not like it was some secret only uncovered during DD here. Additionally one of the main reasons Musk cited for wanting to buy Twitter was to fix the bots!
  - ru552 4y ago
    Say I find a house for sale that I think is at a really low price (I want to flip it), but I can see it has some termite damage on a corner. I don't see damage anywhere else and the owner signs a legal document that the termites are in less than 5% of the house. I think I can fix the termite damage and then turn a profit so I enter into an agreement to buy the house. Before we complete the transaction, I start to notice signs that the termites might be worse that initially thought. I ask to have an inspector come in and determine how much of the house is infested with termites. The owner is denying my inspection request. I inform the owner I won't complete the transaction until I get a termite inspection of the property. The owner's friend owns the local newspaper so they run a story about how I can't afford the house and I'm trying to get out of the purchase. Hi, I'm Elon Musk, but I'm buying a house and not Twitter.
    - KVFinn 4y ago
      It's more like, I find a house for sale and I announce that the owner is missing out on the potential value of this house, because I can see termites everywhere. I am the termite master. The owner of the house has no idea what they are doing with termites, I announce to the public. I know much more about the termites in that house than they do. They can't even see all the termites I see. What fools! The value I will bring is my termite annihilation skills. I insist on buying the house. The owner is reluctant to agree. They delay. I continue to insist that I purchase the house immediately. The owner says, hey let's stop and think about this, let's do due diligence and inspections, let's take our time. I say screw you, there is no due diligence allowed, there is no house inspections allowed, you must accept my offer now. NOW. I insist that the house owner has a legal fiduciary responsibility to their family to sell the house, because my offer is above the assessed public value of the house. This house must be sold to me! They give in to pressure and accept the sale. I sign all the contracts, I waive all the inspections. "What, the house has termites? What a surprise! I want my money back."
- matthewdgreen 4y ago
  >He's going pretty hard on the 5% fake accounts that Twitter reported. I would probably do the same if I were in his position. Yes, but you wouldn't put yourself in his position. This is an entirely unforced error on his part.
- moneywoes 4y ago
  Shouldn’t he have done that prior to making the bid?
- hash07e 4y ago
  Ok. Lets suppose it is not only 5%. Maybe 20%. Would it be fair to buy a company that 20% of its "customers" are fake? He is forcing twitter to be honest or to at least audit it.
  - remram 4y ago
    https://twitter.com/elonmusk/status/1517215066550116354 https://twitter.com/elonmusk/status/1517215066550116354 > If our twitter bid succeeds, we will defeat the spam bots or die trying! > And authenticate all real humans It's a bit weird to now have him go "I'm backing out on the bid because Twitter has many bots and does not authenticate real humans"
  - Arkhaine_kupo 4y ago
    > Would it be fair to buy a company that 20% of its "customers" are fake? Yes. for a number of reasons. 1) You carry the investigation BEFORE filling to buy (he waived the investigation). 2) Twitter never said 5% are bots, they said 5% of monetasible daily users are bots. Thats a very important distinction, and one Musk is well aware off. Because he has used bots to affect tesla stock price before. 3) No one forced him to put a 40 billion offer on the table, but once its on, it affects the market so you cannot back away willie nilly. Thousands of people made choices based on him filling that offer, he has to deal with the responsability and the consequences. > He is forcing twitter to be honest or to at least audit it. No, he is trying to use public sentiment. Like your comment, to not have to pay the 1,000,000,000 fine if he doesn't buy it. And he will have to pay it because he company is now worth much less and he is trying to find a way to weasel away.
  - bthrn 4y ago
    He waived due diligence. If I offer to buy a house and waive contingencies, I can’t subsequently use an inspection report to back out of the sale claiming the house was misrepresented to me.
- csours 4y ago
  I feel like a lot of people are talking past each other on this point. Elon Musk's PERSONAL EXPERIENCE of spambots and fake accounts is really terrible because they always glom onto his posts. So he sees way more than 5%. That is what he wants Twitter to fix. He's spent billions of dollars to say that, and may spend billion(s) more to get out of the deal. One would think he could just fund a personal Twitter engineer or two to clean up his feed for him and come out wayyyy ahead on the deal.
h2odragon 4y ago
the meat of it: > Mr. Musk believes the company is actively resisting and thwarting his information rights (and the company’s corresponding obligations) under the merger agreement. This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.
- qgin 4y ago
  I don’t understand how this works when he waived due diligence. My guess is the intention is to delay the transaction for some reason.
  - deleted 4y ago
    [deleted]
  - lern_too_spel 4y ago
    Insolvency.
- Someone1234 4y ago
  So either: - Because Twitters stock price dipped, he's trying to renegotiate. - This whole thing wasn't a good faith bid to begin with, and Twitter should insist he pays the $1B exit clause. Ultimately if he exits without paying this has done Twitter (and their stockholders) harm without any benefit, and it almost feels like a stunt to distract from unrelated controversy surrounding Musk.
  - FartyMcFarter 4y ago
    Tesla stock also dipped, making it harder for him to finance the purchase.
    - tediousdemise 4y ago
      Good! They say the wealthy have a better chance at success (especially when it comes establishing businesses) due to their huge financial safety nets. It would be nice to see this table turn for once; the 1% shouldn't always be able to have their cake and eat it too. Hopefully this bankrupts Musk in a stark turn of sweet, sweet karma deliverance.
maccam912 4y ago
If youi want to skip over the updated filing and see the actual letter sent, it is here: https://www.sec.gov/Archives/edgar/data/0001418091/000110465922068347/tm2217761d1_ex99-o.htm https://www.sec.gov/Archives/edgar/data/0001418091/000110465...
RaptorJ 4y ago
I'm gonna wait until after Matt Levine tells me to know what I think about this.
- Kon-Peki 4y ago
  Everybody is engaging in securities fraud. PSA: reading his column is securities fraud.
  - snarf21 4y ago
    Serious question: In what specific ways is it securities fraud?
    - avnfish 4y ago
      I think this is a reference to Matt's interesting PoV 'everything is securities fraud' (https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt..., https://www.bloomberg.com/opinion/articles/2021-06-22/everything-still-might-be-securities-fraud https://www.bloomberg.com/opinion/articles/2021-06-22/everyt..., etc.)
    - moneywoes 4y ago
      It’s a joke about his newsletter segment
muglug 4y ago
Seems like he's looking for a tactical retreat — the bots question is hyper-subjective, and provides the company a lot of wiggle-room. How many Twitter accounts were created in automated fashion, but designed to look authentic, and haven't yet been removed by anti-spam measures? That could conceivably be around 5% of active accounts if Twitter is doing its job. If you wanted to inflate that number you could include account takeovers, which are a little harder to measure (created by a real person, but taken over by a botnet using hacked/easy-to-guess credentials). And if you want to inflate the number further, don't just count account numbers — instead look at the % of total activity (likes, retweets, follows) that those accounts represent. You can reasonably expect that number to be higher, given how many dormant accounts Twitter has. Elon has alleged that his followers include lots of bots. That's not necessarily surprising as "follow Elon's account" is the sort of thing a bot developer might program in to look authentic.
- onlyrealcuzzo 4y ago
  > You can reasonably expect that number to be higher, given how many dormant accounts Twitter has. You would measure it in terms of MAU - not total created accounts - right?
  - muglug 4y ago
    MAU has to be done sort-of retroactively: you could say "given the accounts we now know to be bots and have removed, what percentage of January 2022's MAU were inauthentic". Sometimes bot accounts will do organic-looking behaviour for at least a month to evade automatic detection, before doing explicit bot-like things (following particular accounts en-masse).
- farmerstan 4y ago
  I disagree. I think it’s the opposite, Twitter should be providing this data and it’s pretty straightforward. Not providing it or pretending to provide it seems like a way to get out of the sale but leaving open a way to sue him for breach of the sale.
  - 4y ago
JohnJamesRambo 4y ago
So utterly tired of this man. We all knew he would do this. He's the person that buys some expensive item he knows he won't keep at a store and returns it, causing headaches for everyone associated with it and him.
- jmeister 4y ago
  [flagged]
  - fleetwoodsnack 4y ago
    Plutocrats, insofar as they exist and insofar as we use their business acumen to measure competence and corruption, have a fairly narrow mandate and lesser legal authority and responsibilities.
  - iostream24 4y ago
    Self-service is not public service. I also think your relative corruption analysis is so far off base, you might as well be on the moon. Elon Musk is doing his best to ruin something he thought he wanted, and it should be taken in the same bad faith he offered it in.
  - iostream24 4y ago
    - LMYahooTFY 4y ago
      One could say the same of Musk haters, and both would be violating the HN guidelines. Please don't do this here. > Please don't post insinuations about astroturfing, shilling, bots, brigading, foreign agents and the like. It degrades discussion and is usually mistaken. If you're worried about abuse, email hn@ycombinator.com and we'll look at the data.
- strikelaserclaw 4y ago
  Just like the Ballmer peak, i think there is an optimal peak for a CEO to be visible, Elon is way beyond that peak and full into "drunk" territory.
farmerstan 4y ago
Why is Twitter not providing this data? It’s a straightforward request and it’s not like he would disclose it publicly. It feels like Twitter is trying to get out of the sale by using loopholes, this is very strange.
- noirbot 4y ago
  You really think he wouldn't disclose it publicly if he thought it benefited him/for the lulz? He's exactly the kind of person who would just get the papers and publish them immediately.
  - mlindner 4y ago
    Please assume good faith... Also if he was going to buy it, why would he do that? If he wasn't going to buy it, well if Twitter provides it, then he's forced to buy it so it doesn't matter if he reveals it or not.
    - ceejayoz 4y ago
      > Please assume good faith... In Musk's case? Half of what he does is openly trolling. "Assume good faith" means "assume good faith until reason to do otherwise", not "assume good faith no matter what".
    - noirbot 4y ago
      I'm assuming that the OP is posting the question in good faith - Musk on the other hand has a track record of disclosing private information for fun/retaliation, whether or not it's legal for him to do so. "Assume good faith" doesn't mean you have to overlook everything about the situation when discussing the situation. I'm not asserting that Musk would do anything illegal in this case, just that there's a reason the Twitter board may not want to give him private data. It's not obvious that he wouldn't disclose, either directly or implicitly, anything he's given.
      - runevault 4y ago
pavlov 4y ago
For Musk to get out of the deal, there would have to be a "material adverse effect" resulting from any past misrepresentation by Twitter. The standard for MAE used by Delaware courts is apparently very high. For example, if Twitter had misstated its earnings for years and half of the cash on its books just didn't exist, that would be MAE. An estimate about the number of bots that was always couched in airtight legal disclaimers seems to fall far short of MAE. However Twitter's board seems to be a bunch of uninterested pushovers who don't care about the company or the product, so they'll probably just give Musk what he wants to make the PR headache go away.
- colechristensen 4y ago
  Until the deal is done one way or the other, everything is a negotiation tactic.
- hkhanna 4y ago
  M&A lawyer here. Based on my read, Musk is trying to establish that the Company has "materially breached" the Merger Agreement by not providing the requested information. If he can show that, there's no requirement to show a material adverse effect, which is a 2nd and distinct way he could avoid closing. What he's doing is pretty transparent; based on my Monday morning quarterback view of this situation, he simply believes that the price he agreed to for the company is too high given the state of the market. His letter isn't made in good faith and if this gets litigated, I bet the Delaware courts will relish making an example of him.
  - zaphod12 4y ago
    The real question is what will he do if the court orders a fine or specific performance! Can't you just see him ignoring it...and daring them to...what, hold him in contempt? He's completely ignored the SEC already.
    - JumpCrisscross 4y ago
      > Can't you just see him ignoring it...and daring them to...what, hold him in contempt? He's completely ignored the SEC already. The SEC is a civil agency. Court orders are super different. The former can't put anyone in jail. The latter can. They can also, worst case, transfer his assets into receivership and have a court-administered trustee perform from there.
avnfish 4y ago
There's an interesting question here about what extent inflating engagement metrics such as MAUs/DAUs is fraudulent. There are lots of subjective edge-cases - do you count multiple profiles as multiple users? Does _any_ engagement qualify as activity? How aggressively do you discount your metrics based on assumed botting rates? Twitter has overstated it's DAUs previously by 1.9m per quarter[1]. If this has a direct impact on the price, is this therefore fraud? I think we wouldn't be in this situation if the rules were clearer. [1] https://www.theverge.com/2022/4/28/23046170/twitter-miscounted-daily-users-three-years-q1-2022-earnings https://www.theverge.com/2022/4/28/23046170/twitter-miscount...
- skywhopper 4y ago
  The thing is, this isn’t actually easy to figure out. There isn’t even one right answer for how to do it. And if Twitter revisited their analysis and found they were off by one percent, IMO that correction shows good faith, not attempted fraud.
tediousdemise 4y ago
colechristensen 4y ago
It seems like the fake accounts issue was most likely known all along, and Musk kept it as an escape rope if the deal ended up not appearing to be as good as hoped. The market downturn affecting TSLA and TWTR, deals he had to make for financing, and Twitter internals not seeming as rosy probably led him to want out. Finding a key point where the other party was arguably being deceptive which would have a real impact on the value of your investment and then keeping that aside in case the deal seems bad and you want out without paying a billion dollars seems a really quite reasonable play that would be natural in this kind of deal. It's not like Twitter is some poor victim of an aggressor, it's just business. These kind of games don't come off particularly positively for anyone and give people with an axe to grind something to gripe about, but it's all very meh. He'll either get a much lower price for TWTR or all his money back to put back into TSLA or some other venture.
camjohnson26 4y ago
More details in the Financial Times: https://www.ft.com/content/85436ff9-2c06-45be-bb4f-ac195b043d8a https://www.ft.com/content/85436ff9-2c06-45be-bb4f-ac195b043... Twitter stock price is down ~5% today after this. I think it’s pretty clear that Musk wants to walk from the Twitter deal because of the crash in Twitter’s stock price along with the issues he’s had finding funding for the deal. Twitter was required to provide information that will help close the deal, but claiming that Musk needs the algorithm that they use to determine if an account is spam frankly sounds like a bad excuse. Especially since countering spam bots was the reason he gave for doing a deal in the first place. By the way, Hindenburg took out a short position against Twitter early in May, and their position was that the deal no longer made sense and would only go through at a lower price. https://hindenburgresearch.com/twitter/ https://hindenburgresearch.com/twitter/
- inetknght 4y ago
  > claiming that Musk needs the algorithm that they use to determine if an account is spam frankly sounds like a bad excuse. Especially since countering spam bots was the reason he gave for doing a deal in the first place. Knowing the current practices to combat spam is highly relevant for improving upon it.
  - ceejayoz 4y ago
    The current practice is pretty likely to be "we feed it into the ML model", isn't it?
  - dangrossman 4y ago
    He doesn't own the company yet, and is making it pretty clear that he never intends to. As an outsider like you and me, he has nothing to do with improving upon Twitter spam. If he were to purchase the company, then as its owner he would have all the Twitter confidential information he wants. He doesn't get to have it now, especially after waiving due diligence on the no-longer-intended purchase.
  - vehementi 4y ago
    Indeed that would have been a good thing to look up in the due diligence related parts he omitted from wanting in the contract
deleted 4y ago
[deleted]
exdsq 4y ago
I used to like Musk but honestly I’m so sick of him nowadays. His constant need for media attention, his shit posting on Twitter, his backwards attitude to remote work, damn he annoys me. Which is a real shame because I’d have loved to work for Space X but what a way to put people off.
- op00to 4y ago
  the dude was always a toxic bullshitter. it's amazing how people were blinded to this. telsa cars are poor quality garbage, and reflect elon's personality to a T. flashy, but under the surface it's all lies and decay.
  - runevault 4y ago
    Creating companies like SpaceX and Tesla, I can see how people would turn a blind eye to his more troublesome traits because he was creating companies that pointed towards the future in the way other billionaires weren't necessarily. Wanting that to be true and good is perfectly understandable, even if it is also incredibly dangerous.
    - claaams 4y ago
      He didn't create Tesla. He invested early in someone else's idea.
      - exdsq 4y ago
        I'm the OP of the comment this thread was responding too, talking about how I dislike Musk, but I'd still say he was the driving force of Tesla in that it was a close-to-bankrupt company that is unrecognisable of the company you see today. Same with the whole idea he's only rich because his dad is - Zip2 and Paypal were huge acquisitions that dwarf his fathers net worth back then, and having wealth is in no way a guarantee you'll > 1000x that amount.
        op00to 4y ago
jmyeet 4y ago
Twitter making material representations that less than 5% of accounts as part of this deal is gross negligence on the part of the board. They may have had their hands tied. To say otherwise may have contradicted statements they've made to the market and that could land the board and executives in hot water with the SEC and shareholders. I'm not a Twitter investor so I have never looked deeply into their financials. Is this consistent with previous representations? But it should be clear that if Musk insisted on this being part of the deal he would press them on it. Many (including myself) have long suspected a ton of Twitter activity is bot-related. Twitter may end up owing Musk $1 billion in a breakup fee if they renege on their deal (including making material misrepresentations). This combined with the reputational damage may be a fatal blow to Twitter. And by "fatal" I mean vulnerable to a hostile takeover or forced to take an even worse acquisition deal. I respect Musk's accomplishments with SpaceX. Everything else seems to be sussy AF. SolarCity famously was a bailout of one of his companies (SolarCity) that owed a lot of money to another of his companies (SpaceX) by yet another of his companies (Tesla). Tesla too seems to be in trouble. Like many though I have Musk fatigue. He seems to have personally gone off the deep end. I kinda wish they'd lock him up in one of the old nuclear cities and make him build rockets away from social media.
- jcranmer 4y ago
  > I'm not a Twitter investor so I have never looked deeply into their financials. Is this consistent with previous representations? Yes, it very much is. And, actually, given their definitions, it's something I find highly plausible (essentially, they're saying that less than 5% of accounts that look like active daily users are bots).
999900000999 4y ago
If Musk can back out will that cause Twitter's stock to collapse? Outside of just bots, I think Twitter's revenue per user is fairly low. Then again a correction has just started, so it's understandable he wants out
TigeriusKirk 4y ago
One thing I'm pretty confident about is that Twitter really, really does not want to go to court to argue about how many bots they have. Musk is probably using their aversion to a legal deep dive on the topic to renegotiate the price. Which would be good, if brutal, business.
oxff 4y ago
It is pretty clear that twitter is bot infested pile of hot garbage. The entire ad related industry is.
- ironlake 4y ago
  People have been waiting for the online ad industry to collapse from fraud since the 90's.
nkotov 4y ago
The letter[1] is very interesting as well. I think Twitter simply refuses to share the numbers because it really does not know + it might also lead to an investigation of misleading shareholders about DAUs/MAUs. [1]https://www.sec.gov/Archives/edgar/data/0001418091/000110465922068347/tm2217761d1_ex99-o.htm https://www.sec.gov/Archives/edgar/data/0001418091/000110465...
petilon 4y ago
Could it be that buying Twitter was just a pretext for unloading billions of dollars' worth of overvalued Tesla stocks without causing the stock to tank? [1] https://www.forbes.com/sites/sergeiklebnikov/2022/04/29/elon-musk-sells-more-tesla-stock-bringing-total-sales-to-more-than-8-billion-this-week/ https://www.forbes.com/sites/sergeiklebnikov/2022/04/29/elon...
ladyattis 4y ago
I'm confused as to why the amount of bots means much to Musk in this deal. I know he mentioned that he wants to eliminate them which is an admirable goal but as to the methodology to discern which account is a bot account versus a real person isn't exact which is what the current CEO admitted to in a thread. The whole idea of just taking a sample of 100 twitter accounts and testing them may not be the best option to make that determination. If Musk was serious about the bot issue then he should be happy to throw a few million at the problem independently rather than waiting for Twitter Inc to do the same job. Absent his move to purchase Twitter, there's nothing stopping him from building up that analysis. He's just using it as a smokescreen, in my opinion, to get out of the acquisition.
KVFinn 4y ago
Was Musk always this erratic? I used to worry what would happen to Tesla if they lost Musk. Now I worry what will happen to happen to Tesla if Musk sticks around.
natroniks 4y ago
This may have been pointed out elsewhere, but the questions surrounding the % of users that are bots/spam accounts was addressed by Twitter about 3 years ago. In early 2019, Twitter stopped reporting overall user numbers and instead offered the alternative metric "monetizable daily active users." Without saying it outright, the difference between dau and mdau is bots/spam accounts. Many articles discussed this massive change, which happened THREE YEARS AGO. Here is one such article: https://www.socialmediatoday.com/news/twitter-reports-another-decline-in-users-shifts-to-alternate-performance-m/547981/ https://www.socialmediatoday.com/news/twitter-reports-anothe... Q1 2019 was the only quarterly report I can find that included both total users and monetizable users. If we take the difference as representing bots etc, then we can see in the linked article that about 60% of overall Twitter users were not monetizable, ie, 60% of Twitter accounts were bot/spam accounts. So, this is all in the public record. Doubting how much of Twitter's overall accounts are bots - which is what Elon is pursuing - is massively different from Twitter standing by its claim that only 5% of MDAUs are bots. Elon seems to be talking about DAUs and Twitter only reports MDAUs. This distinction seems to be lost on most people following this debate. I think both parties could be offering accurate assessments: Elon could be right that over half of Twitter's users are fake, and Twitter could be right that only 5% of the MDAUs are fake. While both could be right in their assertions, Elon is in the wrong in the big picture. All of this has been disclosed publicly and Twitter never claims that only 5% of users are bots, just 5% of monetizable users. Elon's claims of malfeasance or obfuscation are wrong.
- mlindner 4y ago
  This is an interesting take I hadn't heard before. Thank you. I wonder why this hasn't been getting communicated by Twitter to Elon though (he likely has not have realized that this change occurred).
  - natroniks 4y ago
    I too don't know why Twitter or the press doesn't make this metric more apparent. But I will say, if Musk didn't know about this change, then he already is what he's long aspired to be: a space cadet.
throw457 4y ago
Talking form the viewpoint of a bipolar person he seems to be hypomanic in the last view months.
runako 4y ago
A lot has been said about this, but little about the lack of coherence in Musk's argument. TL;DR; The more of the existing users that are fake, the better the deal is for Musk. Musk was ready to buy (say) 100 million users with 5% fake at a market value of $44B, so call it something like $463 per user that he thinks is fair. He said he has a plan to eliminate all the fake users and push the number of users up to a billion or something. Let's say that works and therefore he's able to drive the company's value to to $463 * 1 billion = $463 billion. Tidy return. But as an exercise, consider what would be the case if all but 10 million current accounts are fake/spam/bots? Now each user would be worth $4,000. So if Musk could grow the site to 1 billion users at the same economics, it would be worth $4 trillion. This is nearly a 10x better return than under the scenario where there are fewer fake users. If you think his strategy will work, he's getting a better deal if most of the users on the site now are fake, because it means a better economic profile of the existing users.
ilrwbwrkhv 4y ago
I honestly think we should let him do whatever he wants. Exceptional humans who are pushing humanity forward should be cut some slack.
93po 4y ago
I wish we could ban Musk topics. Comments are always a cesspool

139 points by jbegley 4y ago

I wonder if this was actually his plan all along: use the attempted acquisition to bring a spotlight onto the fake accounts thing? Whacky.

ru552 4y ago

He's going pretty hard on the 5% fake accounts that Twitter reported. I would probably do the same if I were in his position.

sabertoothed 4y ago
I admire Elon Musk as a visionary and engineer. But here, I think, he is just trying to get out of the deal. The high percentage of bots was exactly the reason why he wanted to buy Twitter in the first place. Because removing the bots would have been a relatively straight-forward way of increasing Twitter's valuation. IIRC he even tweeted about it. [See my clarification below in a comment]
- sabertoothed 4y ago
  On another note, isn't it amazing how well Twitter hides its advanced search functionality? I still don't understand if it is incompetence or deliberate.
- A4ET8a8uTh0 4y ago
  Yes, but sufficiently high amount could potentially mean lower price. So it serves as a way to keep his options open and an indication to counter-party that he could just walk away. As much as Elon annoys me, it hard for me to say he does not know what he is doing. Even the WFH tweet was timed seemingly to lower the cost of severance payments from announced 10% workforce reduction.
  - sabertoothed 4y ago
    I am not saying what he is doing right now isn't rational. I think it's totally rational. He now has the chance of lowering the price or even abandoning the deal. (I just don't believe him regarding the bots. He always knew bots are a problem and likely under-reported.)
  - enragedcacti 4y ago
    How does him reversing the 10% reduction days later play into the master plan? https://www.carscoops.com/2022/06/elon-musk-backtracks-on-tesla-job-cuts-says-total-workforce-will-grow/ https://www.carscoops.com/2022/06/elon-musk-backtracks-on-te...
    - A4ET8a8uTh0 4y ago
      I will genuinely rather wait for more leaks of emails from the factory than try to divine the meaning behind tweets. That said, if the message is confusing then either messenger does not know what he is doing or wants the confusion. In his case, I think the latter is more likely.
- specialp 4y ago
  He might actually have to make this deal. I thought for a while that he had no intention of actually buying them. He just wanted to stir the pot with Twitter. He would then back out, and say something like "Taking these funds and now putting them towards a moon base to mine helium 3 operational by 2023" and people would eat it up. But I think now that it didn't work the way he planned, and now his credibility and ability to make sound judgements is being questioned by many.
- HL33tibCe7 4y ago
  Visionary? Maybe. Engineer? Meh. I think he's first and foremost an entrepreneur, and people overstate his engineering ability. In many cases, he shows total ignorance for the realities of engineering (see e.g: hyperloop). I suspect in those cases he is just surrounded by yes-men who don't want to tell him he's wrong. In general, I get the impression that his success over the years has been contingent on the people he has surrounded himself with. That, in itself, is a skill, though, granted.
- Someone1234 4y ago
  > I admire Elon Musk as a [.] engineer. Engineer? What exactly has Musk ever engineered? You could maybe argue "designer" but even that may be generous.
  - scoopertrooper 4y ago
    > What exactly has Musk ever engineered? A public persona that he's now diligently working to destroy?
  - _jal 4y ago
    Finance.
- mrandish 4y ago
  He might just be trying to reprice the deal at a lower price he now thinks is commensurate to the value. Things were necessarily rushed in the initial agreement due to leaks etc. He and his team have now had time to develop an operating plan. Keep in mind that there are several savvy hedge funds also investing in this deal and this may be driven by their concerns. There's also a possibility he'd just like to ensure the deal closes in a certain later time window. The composition of his personal wealth is complex and highly dependent on his equity holdings which have grown volatile recently.
- mrandish 4y ago
  He might just be trying to reprice the deal at a lower valuation he thinks is commensurate to the potential. Things were necessarily rushed in the initial agreement due to leaks etc. He and his team have now had time to develop an operating plan. Keep in mind that there are several hedge funds also co-investing in this deal and this may be driven by their concerns. There's also a possibility he'd just like to ensure the deal closes in a certain later time window. The composition of his personal wealth is complex and highly dependent on his equity holdings which have grown volatile recently.
- sixQuarks 4y ago
  Wow, look at the emotional anti-Elon bias in here. Just because you said you admire him as a visionary and engineer. You actually disagree with him, but just the fact that you admire him triggers people.
  - sabertoothed 4y ago
    It’s sad that there is little space for nuanced, intellectual discourse. Tribalism and polarisation rule.
    - sixQuarks 4y ago
      What's sadder is that it's happening on HN, one of the last vestiges of good online intellectual discussions.
    - dubswithus 4y ago
      Sometimes dishonesty and general sleaziness overrides personal accomplishments.
acallan 4y ago
Why wasn't this part of his due diligence before contractually obligating himself to purchase Twitter?
- xeromal 4y ago
  I don't know much about this specific situation, but isn't it pretty normal to lock in a price for purchase contingent on everything checking out. It's not like you can go digging around in their databases looking for bot accounts until you have official access. EDIT: Clearly people feel strongly about this so feel free to look at the comments below for some great answers. I'd ask for you to read before commenting though. I keep getting emails rehashing similar things.
  - canucklady 4y ago
    He explicitly waived any kind of due diligence, which is when you would normally agree to a price and make a conditional offer. His offer was unconditional.
    - xeromal 4y ago
      lol, that not a bright move. Hopefully someone hold's his feet to the fire.
  - nightpool 4y ago
    No, the whole point of the pre-merger negotiations is to grill the company on that kind of stuff before locking in the price. you don't get "official access" to anything until you've actually finished the transaction and paid for the company (partially for "don't string us along" reasons and partially for antitrust/collusion reasons). Musk decided to rush into this deal with very little negotiations and while waiving the standard due diligence, and now he's bored with it and creating a pretext to get himself out of it. It's insane to believe he really cares about the bot problem—fixing the problem of "too many bots in his mentions" was one of the reasons he bought the company to begin with!
  - parmenidean 4y ago
mikeyouse 4y ago
It's just silly though -- he complained relentlessly about the bots before he made what was am unconditional offer to buy the company. Twitter hasn't changed their definition of bot in the past decade, they have repeatedly emphasized that they count them in a unique and specific way, and they detailed that methodology (it's not 5% of accounts - it's 5% of "monetizable daily active users"[1]). He has no legal leg to stand on, in a 'legally just' world, he'd be forced to buy Twitter for the price he initially offered. There's a good chance that the entire process would annoy everyone to death, so they may not try and force him to buy a company he no longer wants, but they'd be well within their contractual rights to do so. [1] From their 2022 10K: We define mDAU as people, organizations, or other accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com, Twitter applications that are able to show ads, or paid Twitter products, including subscriptions. Average mDAU for a period represents the number of mDAU on each day of such period divided by the number of days for such period. Changes in mDAU are a measure of changes in the size of our daily logged in or otherwise authenticated active total accounts. To calculate the year-over-year change in mDAU, we subtract the average mDAU for the three month sended in the previous year from the average mDAU for the same three months ended in the current year and divide the result by the average mDAU for the three months ended in the previous year. Additionally, our calculation of mDAU is not based on any standardized industry methodology and is not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies. Similarly, our measures of mDAU growth and engagement may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology.
- omarhaneef 4y ago
  I think this is the right approach: zoom in on the language and discuss what is at stake. So let's talk about the legal leg to stand on part. From his 13d language (amendment #8, filed June 6th, which is public, but I read it on bloomberg and can't find the link to the gov site this second) it doesn't sound like he has an issue with the definition. He wants to rerun the numbers and see for himself. He is asking for the underlying data. Twitter pushed back to say that is not in the scope of what was asked for (apparently, based on his letter). Not taking sides because I was not in the negotiations and know nothing about what each side, indicated, what the legal contract says and so forth. Just saying, the issue is whether they should provide the data for him to run his own calculations.
rco8786 4y ago
Except he very deliberately put himself in this position. Twitter has reported 5% as the bot count for years, it’s not like it was some secret only uncovered during DD here. Additionally one of the main reasons Musk cited for wanting to buy Twitter was to fix the bots!
- ru552 4y ago
  Say I find a house for sale that I think is at a really low price (I want to flip it), but I can see it has some termite damage on a corner. I don't see damage anywhere else and the owner signs a legal document that the termites are in less than 5% of the house. I think I can fix the termite damage and then turn a profit so I enter into an agreement to buy the house. Before we complete the transaction, I start to notice signs that the termites might be worse that initially thought. I ask to have an inspector come in and determine how much of the house is infested with termites. The owner is denying my inspection request. I inform the owner I won't complete the transaction until I get a termite inspection of the property. The owner's friend owns the local newspaper so they run a story about how I can't afford the house and I'm trying to get out of the purchase. Hi, I'm Elon Musk, but I'm buying a house and not Twitter.
  - KVFinn 4y ago
    It's more like, I find a house for sale and I announce that the owner is missing out on the potential value of this house, because I can see termites everywhere. I am the termite master. The owner of the house has no idea what they are doing with termites, I announce to the public. I know much more about the termites in that house than they do. They can't even see all the termites I see. What fools! The value I will bring is my termite annihilation skills. I insist on buying the house. The owner is reluctant to agree. They delay. I continue to insist that I purchase the house immediately. The owner says, hey let's stop and think about this, let's do due diligence and inspections, let's take our time. I say screw you, there is no due diligence allowed, there is no house inspections allowed, you must accept my offer now. NOW. I insist that the house owner has a legal fiduciary responsibility to their family to sell the house, because my offer is above the assessed public value of the house. This house must be sold to me! They give in to pressure and accept the sale. I sign all the contracts, I waive all the inspections. "What, the house has termites? What a surprise! I want my money back."
matthewdgreen 4y ago
>He's going pretty hard on the 5% fake accounts that Twitter reported. I would probably do the same if I were in his position. Yes, but you wouldn't put yourself in his position. This is an entirely unforced error on his part.
moneywoes 4y ago
Shouldn’t he have done that prior to making the bid?
hash07e 4y ago
Ok. Lets suppose it is not only 5%. Maybe 20%. Would it be fair to buy a company that 20% of its "customers" are fake? He is forcing twitter to be honest or to at least audit it.
- remram 4y ago
  https://twitter.com/elonmusk/status/1517215066550116354 https://twitter.com/elonmusk/status/1517215066550116354 > If our twitter bid succeeds, we will defeat the spam bots or die trying! > And authenticate all real humans It's a bit weird to now have him go "I'm backing out on the bid because Twitter has many bots and does not authenticate real humans"
- Arkhaine_kupo 4y ago
  > Would it be fair to buy a company that 20% of its "customers" are fake? Yes. for a number of reasons. 1) You carry the investigation BEFORE filling to buy (he waived the investigation). 2) Twitter never said 5% are bots, they said 5% of monetasible daily users are bots. Thats a very important distinction, and one Musk is well aware off. Because he has used bots to affect tesla stock price before. 3) No one forced him to put a 40 billion offer on the table, but once its on, it affects the market so you cannot back away willie nilly. Thousands of people made choices based on him filling that offer, he has to deal with the responsability and the consequences. > He is forcing twitter to be honest or to at least audit it. No, he is trying to use public sentiment. Like your comment, to not have to pay the 1,000,000,000 fine if he doesn't buy it. And he will have to pay it because he company is now worth much less and he is trying to find a way to weasel away.
- bthrn 4y ago
  He waived due diligence. If I offer to buy a house and waive contingencies, I can’t subsequently use an inspection report to back out of the sale claiming the house was misrepresented to me.
csours 4y ago
I feel like a lot of people are talking past each other on this point. Elon Musk's PERSONAL EXPERIENCE of spambots and fake accounts is really terrible because they always glom onto his posts. So he sees way more than 5%. That is what he wants Twitter to fix. He's spent billions of dollars to say that, and may spend billion(s) more to get out of the deal. One would think he could just fund a personal Twitter engineer or two to clean up his feed for him and come out wayyyy ahead on the deal.

h2odragon 4y ago

the meat of it: > Mr. Musk believes the company is actively resisting and thwarting his information rights (and the company’s corresponding obligations) under the merger agreement. This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.

qgin 4y ago
I don’t understand how this works when he waived due diligence. My guess is the intention is to delay the transaction for some reason.
- deleted 4y ago
  [deleted]
- lern_too_spel 4y ago
  Insolvency.
Someone1234 4y ago
So either: - Because Twitters stock price dipped, he's trying to renegotiate. - This whole thing wasn't a good faith bid to begin with, and Twitter should insist he pays the $1B exit clause. Ultimately if he exits without paying this has done Twitter (and their stockholders) harm without any benefit, and it almost feels like a stunt to distract from unrelated controversy surrounding Musk.
- FartyMcFarter 4y ago
  Tesla stock also dipped, making it harder for him to finance the purchase.
  - tediousdemise 4y ago
    Good! They say the wealthy have a better chance at success (especially when it comes establishing businesses) due to their huge financial safety nets. It would be nice to see this table turn for once; the 1% shouldn't always be able to have their cake and eat it too. Hopefully this bankrupts Musk in a stark turn of sweet, sweet karma deliverance.

maccam912 4y ago

If youi want to skip over the updated filing and see the actual letter sent, it is here: https://www.sec.gov/Archives/edgar/data/0001418091/000110465922068347/tm2217761d1_ex99-o.htm https://www.sec.gov/Archives/edgar/data/0001418091/000110465...

RaptorJ 4y ago

I'm gonna wait until after Matt Levine tells me to know what I think about this.

Kon-Peki 4y ago
Everybody is engaging in securities fraud. PSA: reading his column is securities fraud.
- snarf21 4y ago
  Serious question: In what specific ways is it securities fraud?
  - avnfish 4y ago
    I think this is a reference to Matt's interesting PoV 'everything is securities fraud' (https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt..., https://www.bloomberg.com/opinion/articles/2021-06-22/everything-still-might-be-securities-fraud https://www.bloomberg.com/opinion/articles/2021-06-22/everyt..., etc.)
  - moneywoes 4y ago
    It’s a joke about his newsletter segment

muglug 4y ago

Seems like he's looking for a tactical retreat — the bots question is hyper-subjective, and provides the company a lot of wiggle-room. How many Twitter accounts were created in automated fashion, but designed to look authentic, and haven't yet been removed by anti-spam measures? That could conceivably be around 5% of active accounts if Twitter is doing its job. If you wanted to inflate that number you could include account takeovers, which are a little harder to measure (created by a real person, but taken over by a botnet using hacked/easy-to-guess credentials). And if you want to inflate the number further, don't just count account numbers — instead look at the % of total activity (likes, retweets, follows) that those accounts represent. You can reasonably expect that number to be higher, given how many dormant accounts Twitter has. Elon has alleged that his followers include lots of bots. That's not necessarily surprising as "follow Elon's account" is the sort of thing a bot developer might program in to look authentic.

onlyrealcuzzo 4y ago
> You can reasonably expect that number to be higher, given how many dormant accounts Twitter has. You would measure it in terms of MAU - not total created accounts - right?
- muglug 4y ago
  MAU has to be done sort-of retroactively: you could say "given the accounts we now know to be bots and have removed, what percentage of January 2022's MAU were inauthentic". Sometimes bot accounts will do organic-looking behaviour for at least a month to evade automatic detection, before doing explicit bot-like things (following particular accounts en-masse).
farmerstan 4y ago
I disagree. I think it’s the opposite, Twitter should be providing this data and it’s pretty straightforward. Not providing it or pretending to provide it seems like a way to get out of the sale but leaving open a way to sue him for breach of the sale.
- 4y ago

JohnJamesRambo 4y ago

So utterly tired of this man. We all knew he would do this. He's the person that buys some expensive item he knows he won't keep at a store and returns it, causing headaches for everyone associated with it and him.

jmeister 4y ago
[flagged]
- fleetwoodsnack 4y ago
  Plutocrats, insofar as they exist and insofar as we use their business acumen to measure competence and corruption, have a fairly narrow mandate and lesser legal authority and responsibilities.
- iostream24 4y ago
  Self-service is not public service. I also think your relative corruption analysis is so far off base, you might as well be on the moon. Elon Musk is doing his best to ruin something he thought he wanted, and it should be taken in the same bad faith he offered it in.
- iostream24 4y ago
  - LMYahooTFY 4y ago
    One could say the same of Musk haters, and both would be violating the HN guidelines. Please don't do this here. > Please don't post insinuations about astroturfing, shilling, bots, brigading, foreign agents and the like. It degrades discussion and is usually mistaken. If you're worried about abuse, email hn@ycombinator.com and we'll look at the data.
strikelaserclaw 4y ago
Just like the Ballmer peak, i think there is an optimal peak for a CEO to be visible, Elon is way beyond that peak and full into "drunk" territory.

farmerstan 4y ago

Why is Twitter not providing this data? It’s a straightforward request and it’s not like he would disclose it publicly. It feels like Twitter is trying to get out of the sale by using loopholes, this is very strange.

noirbot 4y ago
You really think he wouldn't disclose it publicly if he thought it benefited him/for the lulz? He's exactly the kind of person who would just get the papers and publish them immediately.
- mlindner 4y ago
  Please assume good faith... Also if he was going to buy it, why would he do that? If he wasn't going to buy it, well if Twitter provides it, then he's forced to buy it so it doesn't matter if he reveals it or not.
  - ceejayoz 4y ago
    > Please assume good faith... In Musk's case? Half of what he does is openly trolling. "Assume good faith" means "assume good faith until reason to do otherwise", not "assume good faith no matter what".
  - noirbot 4y ago
    I'm assuming that the OP is posting the question in good faith - Musk on the other hand has a track record of disclosing private information for fun/retaliation, whether or not it's legal for him to do so. "Assume good faith" doesn't mean you have to overlook everything about the situation when discussing the situation. I'm not asserting that Musk would do anything illegal in this case, just that there's a reason the Twitter board may not want to give him private data. It's not obvious that he wouldn't disclose, either directly or implicitly, anything he's given.
    - runevault 4y ago

pavlov 4y ago

For Musk to get out of the deal, there would have to be a "material adverse effect" resulting from any past misrepresentation by Twitter. The standard for MAE used by Delaware courts is apparently very high. For example, if Twitter had misstated its earnings for years and half of the cash on its books just didn't exist, that would be MAE. An estimate about the number of bots that was always couched in airtight legal disclaimers seems to fall far short of MAE. However Twitter's board seems to be a bunch of uninterested pushovers who don't care about the company or the product, so they'll probably just give Musk what he wants to make the PR headache go away.

colechristensen 4y ago
Until the deal is done one way or the other, everything is a negotiation tactic.
hkhanna 4y ago
M&A lawyer here. Based on my read, Musk is trying to establish that the Company has "materially breached" the Merger Agreement by not providing the requested information. If he can show that, there's no requirement to show a material adverse effect, which is a 2nd and distinct way he could avoid closing. What he's doing is pretty transparent; based on my Monday morning quarterback view of this situation, he simply believes that the price he agreed to for the company is too high given the state of the market. His letter isn't made in good faith and if this gets litigated, I bet the Delaware courts will relish making an example of him.
- zaphod12 4y ago
  The real question is what will he do if the court orders a fine or specific performance! Can't you just see him ignoring it...and daring them to...what, hold him in contempt? He's completely ignored the SEC already.
  - JumpCrisscross 4y ago
    > Can't you just see him ignoring it...and daring them to...what, hold him in contempt? He's completely ignored the SEC already. The SEC is a civil agency. Court orders are super different. The former can't put anyone in jail. The latter can. They can also, worst case, transfer his assets into receivership and have a court-administered trustee perform from there.

avnfish 4y ago

There's an interesting question here about what extent inflating engagement metrics such as MAUs/DAUs is fraudulent. There are lots of subjective edge-cases - do you count multiple profiles as multiple users? Does _any_ engagement qualify as activity? How aggressively do you discount your metrics based on assumed botting rates? Twitter has overstated it's DAUs previously by 1.9m per quarter[1]. If this has a direct impact on the price, is this therefore fraud? I think we wouldn't be in this situation if the rules were clearer. [1] https://www.theverge.com/2022/4/28/23046170/twitter-miscounted-daily-users-three-years-q1-2022-earnings https://www.theverge.com/2022/4/28/23046170/twitter-miscount...

skywhopper 4y ago
The thing is, this isn’t actually easy to figure out. There isn’t even one right answer for how to do it. And if Twitter revisited their analysis and found they were off by one percent, IMO that correction shows good faith, not attempted fraud.

tediousdemise 4y ago

colechristensen 4y ago

It seems like the fake accounts issue was most likely known all along, and Musk kept it as an escape rope if the deal ended up not appearing to be as good as hoped. The market downturn affecting TSLA and TWTR, deals he had to make for financing, and Twitter internals not seeming as rosy probably led him to want out. Finding a key point where the other party was arguably being deceptive which would have a real impact on the value of your investment and then keeping that aside in case the deal seems bad and you want out without paying a billion dollars seems a really quite reasonable play that would be natural in this kind of deal. It's not like Twitter is some poor victim of an aggressor, it's just business. These kind of games don't come off particularly positively for anyone and give people with an axe to grind something to gripe about, but it's all very meh. He'll either get a much lower price for TWTR or all his money back to put back into TSLA or some other venture.

camjohnson26 4y ago

More details in the Financial Times: https://www.ft.com/content/85436ff9-2c06-45be-bb4f-ac195b043d8a https://www.ft.com/content/85436ff9-2c06-45be-bb4f-ac195b043... Twitter stock price is down ~5% today after this. I think it’s pretty clear that Musk wants to walk from the Twitter deal because of the crash in Twitter’s stock price along with the issues he’s had finding funding for the deal. Twitter was required to provide information that will help close the deal, but claiming that Musk needs the algorithm that they use to determine if an account is spam frankly sounds like a bad excuse. Especially since countering spam bots was the reason he gave for doing a deal in the first place. By the way, Hindenburg took out a short position against Twitter early in May, and their position was that the deal no longer made sense and would only go through at a lower price. https://hindenburgresearch.com/twitter/ https://hindenburgresearch.com/twitter/

inetknght 4y ago
> claiming that Musk needs the algorithm that they use to determine if an account is spam frankly sounds like a bad excuse. Especially since countering spam bots was the reason he gave for doing a deal in the first place. Knowing the current practices to combat spam is highly relevant for improving upon it.
- ceejayoz 4y ago
  The current practice is pretty likely to be "we feed it into the ML model", isn't it?
- dangrossman 4y ago
  He doesn't own the company yet, and is making it pretty clear that he never intends to. As an outsider like you and me, he has nothing to do with improving upon Twitter spam. If he were to purchase the company, then as its owner he would have all the Twitter confidential information he wants. He doesn't get to have it now, especially after waiving due diligence on the no-longer-intended purchase.
- vehementi 4y ago
  Indeed that would have been a good thing to look up in the due diligence related parts he omitted from wanting in the contract

deleted 4y ago

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exdsq 4y ago

I used to like Musk but honestly I’m so sick of him nowadays. His constant need for media attention, his shit posting on Twitter, his backwards attitude to remote work, damn he annoys me. Which is a real shame because I’d have loved to work for Space X but what a way to put people off.

op00to 4y ago
the dude was always a toxic bullshitter. it's amazing how people were blinded to this. telsa cars are poor quality garbage, and reflect elon's personality to a T. flashy, but under the surface it's all lies and decay.
- runevault 4y ago
  Creating companies like SpaceX and Tesla, I can see how people would turn a blind eye to his more troublesome traits because he was creating companies that pointed towards the future in the way other billionaires weren't necessarily. Wanting that to be true and good is perfectly understandable, even if it is also incredibly dangerous.
  - claaams 4y ago
    He didn't create Tesla. He invested early in someone else's idea.
    - exdsq 4y ago
      I'm the OP of the comment this thread was responding too, talking about how I dislike Musk, but I'd still say he was the driving force of Tesla in that it was a close-to-bankrupt company that is unrecognisable of the company you see today. Same with the whole idea he's only rich because his dad is - Zip2 and Paypal were huge acquisitions that dwarf his fathers net worth back then, and having wealth is in no way a guarantee you'll > 1000x that amount.
      - op00to 4y ago

jmyeet 4y ago

Twitter making material representations that less than 5% of accounts as part of this deal is gross negligence on the part of the board. They may have had their hands tied. To say otherwise may have contradicted statements they've made to the market and that could land the board and executives in hot water with the SEC and shareholders. I'm not a Twitter investor so I have never looked deeply into their financials. Is this consistent with previous representations? But it should be clear that if Musk insisted on this being part of the deal he would press them on it. Many (including myself) have long suspected a ton of Twitter activity is bot-related. Twitter may end up owing Musk $1 billion in a breakup fee if they renege on their deal (including making material misrepresentations). This combined with the reputational damage may be a fatal blow to Twitter. And by "fatal" I mean vulnerable to a hostile takeover or forced to take an even worse acquisition deal. I respect Musk's accomplishments with SpaceX. Everything else seems to be sussy AF. SolarCity famously was a bailout of one of his companies (SolarCity) that owed a lot of money to another of his companies (SpaceX) by yet another of his companies (Tesla). Tesla too seems to be in trouble. Like many though I have Musk fatigue. He seems to have personally gone off the deep end. I kinda wish they'd lock him up in one of the old nuclear cities and make him build rockets away from social media.

jcranmer 4y ago
> I'm not a Twitter investor so I have never looked deeply into their financials. Is this consistent with previous representations? Yes, it very much is. And, actually, given their definitions, it's something I find highly plausible (essentially, they're saying that less than 5% of accounts that look like active daily users are bots).

999900000999 4y ago

If Musk can back out will that cause Twitter's stock to collapse? Outside of just bots, I think Twitter's revenue per user is fairly low. Then again a correction has just started, so it's understandable he wants out

TigeriusKirk 4y ago

One thing I'm pretty confident about is that Twitter really, really does not want to go to court to argue about how many bots they have. Musk is probably using their aversion to a legal deep dive on the topic to renegotiate the price. Which would be good, if brutal, business.

oxff 4y ago

It is pretty clear that twitter is bot infested pile of hot garbage. The entire ad related industry is.

ironlake 4y ago
People have been waiting for the online ad industry to collapse from fraud since the 90's.

nkotov 4y ago

The letter[1] is very interesting as well. I think Twitter simply refuses to share the numbers because it really does not know + it might also lead to an investigation of misleading shareholders about DAUs/MAUs. [1]https://www.sec.gov/Archives/edgar/data/0001418091/000110465922068347/tm2217761d1_ex99-o.htm https://www.sec.gov/Archives/edgar/data/0001418091/000110465...

petilon 4y ago

Could it be that buying Twitter was just a pretext for unloading billions of dollars' worth of overvalued Tesla stocks without causing the stock to tank? [1] https://www.forbes.com/sites/sergeiklebnikov/2022/04/29/elon-musk-sells-more-tesla-stock-bringing-total-sales-to-more-than-8-billion-this-week/ https://www.forbes.com/sites/sergeiklebnikov/2022/04/29/elon...

ladyattis 4y ago

I'm confused as to why the amount of bots means much to Musk in this deal. I know he mentioned that he wants to eliminate them which is an admirable goal but as to the methodology to discern which account is a bot account versus a real person isn't exact which is what the current CEO admitted to in a thread. The whole idea of just taking a sample of 100 twitter accounts and testing them may not be the best option to make that determination. If Musk was serious about the bot issue then he should be happy to throw a few million at the problem independently rather than waiting for Twitter Inc to do the same job. Absent his move to purchase Twitter, there's nothing stopping him from building up that analysis. He's just using it as a smokescreen, in my opinion, to get out of the acquisition.

KVFinn 4y ago

Was Musk always this erratic? I used to worry what would happen to Tesla if they lost Musk. Now I worry what will happen to happen to Tesla if Musk sticks around.

natroniks 4y ago

This may have been pointed out elsewhere, but the questions surrounding the % of users that are bots/spam accounts was addressed by Twitter about 3 years ago. In early 2019, Twitter stopped reporting overall user numbers and instead offered the alternative metric "monetizable daily active users." Without saying it outright, the difference between dau and mdau is bots/spam accounts. Many articles discussed this massive change, which happened THREE YEARS AGO. Here is one such article: https://www.socialmediatoday.com/news/twitter-reports-another-decline-in-users-shifts-to-alternate-performance-m/547981/ https://www.socialmediatoday.com/news/twitter-reports-anothe... Q1 2019 was the only quarterly report I can find that included both total users and monetizable users. If we take the difference as representing bots etc, then we can see in the linked article that about 60% of overall Twitter users were not monetizable, ie, 60% of Twitter accounts were bot/spam accounts. So, this is all in the public record. Doubting how much of Twitter's overall accounts are bots - which is what Elon is pursuing - is massively different from Twitter standing by its claim that only 5% of MDAUs are bots. Elon seems to be talking about DAUs and Twitter only reports MDAUs. This distinction seems to be lost on most people following this debate. I think both parties could be offering accurate assessments: Elon could be right that over half of Twitter's users are fake, and Twitter could be right that only 5% of the MDAUs are fake. While both could be right in their assertions, Elon is in the wrong in the big picture. All of this has been disclosed publicly and Twitter never claims that only 5% of users are bots, just 5% of monetizable users. Elon's claims of malfeasance or obfuscation are wrong.

mlindner 4y ago
This is an interesting take I hadn't heard before. Thank you. I wonder why this hasn't been getting communicated by Twitter to Elon though (he likely has not have realized that this change occurred).
- natroniks 4y ago
  I too don't know why Twitter or the press doesn't make this metric more apparent. But I will say, if Musk didn't know about this change, then he already is what he's long aspired to be: a space cadet.

throw457 4y ago

Talking form the viewpoint of a bipolar person he seems to be hypomanic in the last view months.

runako 4y ago

A lot has been said about this, but little about the lack of coherence in Musk's argument. TL;DR; The more of the existing users that are fake, the better the deal is for Musk. Musk was ready to buy (say) 100 million users with 5% fake at a market value of $44B, so call it something like $463 per user that he thinks is fair. He said he has a plan to eliminate all the fake users and push the number of users up to a billion or something. Let's say that works and therefore he's able to drive the company's value to to $463 * 1 billion = $463 billion. Tidy return. But as an exercise, consider what would be the case if all but 10 million current accounts are fake/spam/bots? Now each user would be worth $4,000. So if Musk could grow the site to 1 billion users at the same economics, it would be worth $4 trillion. This is nearly a 10x better return than under the scenario where there are fewer fake users. If you think his strategy will work, he's getting a better deal if most of the users on the site now are fake, because it means a better economic profile of the existing users.

ilrwbwrkhv 4y ago

I honestly think we should let him do whatever he wants. Exceptional humans who are pushing humanity forward should be cut some slack.

93po 4y ago

I wish we could ban Musk topics. Comments are always a cesspool