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The filed letter (https://www.sec.gov/Archives/edgar/data/1418091/000110465922078413/tm2220599d1_ex99-p.htm https://www.sec.gov/Archives/edgar/data/1418091/0001

The filed letter (https://www.sec.gov/Archives/edgar/data/1418091/000110465922078413/tm2220599d1_ex99-p.htm https://www.sec.gov/Archives/edgar/data/1418091/000110465922...) isn't the knockdown argument I would be expecting. Musk is saying, you haven't demonstrated your numbers are accurate. But having signed the merger agreement and waived due diligence, I think he needs to demonstrate that they are _not_ accurate. Complaining Twitter rate-limited his API access (which would be very foolish on their part) or that their bot measurement standards are "arbitrary" doesn't seem to get there. The letter complains that Musk asked for data allowing him to "independently verify Twitter's representations regarding the number of mDAU" -- but where does the agreement provide for that verification as a condition of the deal? Maybe Twitter didn't provide sufficient information for Musk to "independently verify" that number -- that means nothing without showing Twitter had a duty to provide that information, or that Musk had a right to his own verification. (Any lawyer agreeing to the other side's verification of such a thing probably isn't a very good lawyer.) The last paragraph, complaining about firings and hiring freezes and departures, seems positively desperate. Who seriously cares about this stuff? "I relied on your numbers but now they seem soft" is different than "I relied on your numbers but now they are clearly wrong". I have enormous respect for his engineering and business skills, he's accomplished some remarkable things. But he doesn't seem so great as a dealmaker. Perhaps he's badly advised, but hey, he chose his advisors. I would think Twitter will sue for specific performance, and they probably have a case. And Musk is liable for their full market cap, and any trial would depend on a legal team that has a hard time writing a clear letter. I think Musk is in trouble here.

np1810 4y ago
Well, here's the tweet from Bret Taylor (chair of the board at Twitter)... https://mobile.twitter.com/btaylor/status/1545526087089696768 https://mobile.twitter.com/btaylor/status/154552608708969676... > "The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery."
shuckles 4y ago
Twitter has already said they'll sue for specific performance: https://twitter.com/btaylor/status/1545526087089696768 https://twitter.com/btaylor/status/1545526087089696768
- elliekelly 4y ago
  My heart sank when I read your comment: why on earth would the board sue for specific performance!? But my reading of the statement in the tweet is that they plan to sue for enforcement of the agreement which I believe means paying the agreed-upon penalty for backing out of the deal. I don’t at all read that statement as a plan to seek specific performance.
  - howinteresting 4y ago
    The agreed-upon penalty is when both sides mutually back out of the deal. But right now Twitter's board thinks it can get a lot more out of Musk than just $1B, and my understanding is that the board is likely correct.
  - agrajag 4y ago
    > closing the transaction on the price and terms agreed upon They're definitely suing for specific performance, and I'm not sure they really have any other option at this point. It would be by far in their best financial interest if they can force closing the sale, and Musk's objections seem really thin. Doing anything less than that is complete capitulation I can see them reaching a settlement to agree to cancel the deal with Musk if he agrees to pay a significant penalty ($5B+), or maybe agree to reduce the purchase price some, but why not sue for specific performance if you think you'll win?
    - elliekelly 4y ago
      Is his “financing secured”? It just seems like an incredible (and incredibly risky) long shot to me: a judge actually ordering a sale to an unwilling buyer (and Musk, of all buyers!) is a long shot and the big banks going through with funding such a big deal to an _unwilling_ owner is a long shot. But _even_if_ both of those two unlikely things happen what happens when the judge orders specific performance and Musk just... doesn’t? (Not usually a risk you have to factor in but with Musk I think this is absolutely a real possibility. Maybe even the most likely possibility.) Will they issue a warrant for his arrest? A daily fine for contempt? That would be the deal of the century for Musk. I don’t know the right answer when you’re dealing with a megalomaniac like Musk but I really don’t think specific performance is it. I am cautiously optimistic that whatever it is Musk is up to will eventually give rise to some cool new federal securities laws. Maybe even some new federal crimes! (Who am I kidding, a crime that only the wealthiest of the wealth would even be able to commit? Not in a million years!)
georgeecollins 4y ago
Right- he waived diligence. Twitter has no obligation to prove anything to him. Twitter is obligated to give him documents if they are reasonable to request and helpful for him in financial planning. If the documents Twitter has on hand are flawed or not comprehensive, that doesn't give a pretext to leave the deal. I am sure his lawyers know this and it will all be negotiated.
- fundad 4y ago
  How can any judgement in Twitter’s favor be enforced? Mail a bill for $1B or more and somehow collect the debt? Maybe the bank could choose to execute the purchase agreement but why would they since they (ironically) can’t force him physically show up and run Twitter. I doubt SEC has any measures they can take through Tesla which would be weird. He didn’t agree to “specific performance” expecting that to matter to him.
- meragrin_ 4y ago
  If Twitter fails to provide reasonable access to data necessary to secure debt to finance the purchase, it does indeed give a pretext to leave the deal. It is part of the merger agreement. You can't tell me that a lender would not want some independent assessment of Twitter's claims before lending.
  - ImPostingOnHN 4y ago
    it seems he was given access to the Firehose, AKA all the data, but curiously failed to mention that in his filing (I guess it was enough, and he had no complaints?), instead complaining about rate limiting on more specific APIs (the standard Twitter API), which seem extraneous given the Firehose also, said rate limits were lifted
    - sokoloff 4y ago
      The firehose is not all the data. Twitter’s value depends heavily on human views of tweets (not part of the firehose), not on the tweets’ content (the firehose).
meragrin_ 4y ago
> Musk is saying, you haven't demonstrated your numbers are accurate. It has nothing to do with accuracy. Twitter is supposedly not providing the data: 'While Section 6.4 of the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests “for any reasonable business purpose related to the consummation of the transaction,” Twitter has not complied with its contractual obligations.' > The letter complains that Musk asked for data allowing him to "independently verify Twitter's representations regarding the number of mDAU" -- but where does the agreement provide for that verification as a condition of the deal? Section 6.11, the part of the deal where Twitter needs to provide necessary information to secure debt: 'and under Section 6.11 of the Merger Agreement, to information “reasonably requested” in connection with his efforts to secure the debt financing necessary to consummate the transaction.' I have little doubt anyone lending that kind of money would require the buyer to independently verify the mDAU.
- chernevik 4y ago
  I will be very surprised that Twitter's position was less than "you can have anything you want", precisely to avoid any complaint of non-cooperation. I do agree that the agreement's debt financing provisions may provide Musk an out -- "I wanted to close, but I couldn't get debt b/c you wouldn't cooperate". I'm a little surprised that Twitter agreed to any sort of financing provision, precisely because it seems to allow Musk to screw up his debt raising and then point to that as an out. But that is not a complaint in the letter, and becomes an argument about what lenders require for debt financing. Musk will have to show that lenders cared about this, and Twitter will have discovery to find evidence they didn't.
  - philipwhiuk 4y ago
    > I will be very surprised that Twitter's position was less than "you can have anything you want", precisely to avoid any complaint of non-cooperation. Be very surprised, they capped the firehouse. From the filing: > Additionally, those APIs contained an artificial “cap” on the number of queries that Mr. Musk and his team can run regardless of the rate limit—an issue that initially prevented Mr. Musk and his advisors from completing an analysis of the data in any reasonable period of time. Mr. Musk raised this issue as soon as he became aware of it, in the first paragraph of the June 29 Letter: “we have just been informed by our data experts that Twitter has placed an artificial cap on the number of searches our experts can perform with this data, which is now preventing Mr. Musk and his team from doing their analysis.” That cap was not removed until July 6, after Mr. Musk demanded its removal for a second time.
hackernewds 4y ago
He's a great deal maker. But his ego, need for attention and celebrity, legitimate Twitter addiction undermines him.
StopHammoTime 4y ago
During a merger, discovery is absolutely a right the purchasing side has. The target company should open its books, your assumption about them not disclosing is incorrect.
- StopHammoTime 4y ago
  You guys are right, I completely missed that he waived his rights on this term. My apologies, I made an assumption (which was wrong) that Musk was acting reasonably.
- HillRat 4y ago
  The problem for Musk is that he filed an offer letter, which is normally what you do after due-dil, and there’s nothing in that offer that gives him a way out without pulling the MAE card, which is a pretty weak reed to rely on (though his most recent filing gamely works as many angles as possible, as you’d expect from Skadden). The buyout offer was a ridiculous move that feels like it was predicated on hurt feelings over the board debacle, but it’s not the Chancery Court’s job to protect billionaires from themselves, and Musk is generally the sort of manager that the court casts as the bad guy in the little morality plays they make of cases. Doesn’t mean they’ll compel specific performance (I’m skeptical that an equity court is going to see that as the best option, not least because it’s not clear to me Musk would have enough cash to operate the company if the sale went through under current market conditions), but I suspect that, after protracted negotiations and litigation, either the board will accept a modest haircut on the offer (again, due to market conditions), or the court will award liquidated damages ($1bn) plus possibly some additional damages if Twitter wants to argue that Musk violated the confidentiality and nondisparagement provisions of the deal. (If the former, I suspect that we’ll see a bunch of strike suits from aggrieved shareholders land in court anyway, so buckle up for a lot of litigation regardless.)
- thelamest 4y ago
  No it’s not. See e.g. https://twitter.com/matt_levine/status/1545152093501227009 https://twitter.com/matt_levine/status/1545152093501227009, https://twitter.com/MorganRicks1/status/1545404990457536512 https://twitter.com/MorganRicks1/status/1545404990457536512. In what meaning are you even using the term?
random314 4y ago
> I have enormous respect for his engineering He has never demonstrated engineering skills. He has always been a business manager. But with all of the business comedy he has performed this year, I am beginning to doubt his business skills too. Perhaps it's the VPs under him who managed the business well, while Elon remained the PR front person and primary investor. Much like SpaceX.
- simondotau 4y ago
  Elon Musk is literally the Chief Engineer at SpaceX. His technical proficiency is validated by other senior engineers who work there, as well as senior engineers at NASA. There are also countless hours of unedited footage of him demonstrating his deep technical understanding of rocket engineering. https://www.reddit.com/r/SpaceXLounge/comments/k1e0ta/evidence_that_musk_is_the_chief_engineer_of_spacex/ https://www.reddit.com/r/SpaceXLounge/comments/k1e0ta/eviden... https://www.youtube.com/watch?v=hIPLmZK3C1Y https://www.youtube.com/watch?v=hIPLmZK3C1Y
  - JoshCole 4y ago
    You seem to think he doesn't know the facts, but I suspect that he does. He just doesn't care about facts or truth. He is the sort of person who likes to win debates and get hits on people he dislikes. So trying to correct him on these points is a waste of your time. I say this from experience with him. I've tried talking to him before. I shared about something I find so very fascinating - that approximation via abstraction is provably better than perfection in many learning situations because of its relationship with computational complexity. He asked for proof; I provided it. I won't repeat the proof here, but know that this isn't an obscure and unknown result - here is Peter Norvig in Artificial Intelligence: A Modern Approach discussing related ideas: > Page 172. "One way to deal with this huge number is with abstraction: i.e. by treating similar hands as identical. For example, it is very important which aces and kings are in a hand, but whether hand has a 4 or a 5 is not as important, and can be abstracted away." > Page 173. "Because calculating optimal decisions in complex games is intractable, all algorithms must make some assumptions and approximations." I earnestly engaged with random314 on this topic. He ultimately concluded that he had won the argument, taught me something, and condescended that I ought to have known better than to have talked with him. Along the way he compared me with people he found foolish, claimed I was incoherent in order to avoid addressing my points, gaslit with regard to the thread topic, accused me of jargon, and even made the absurdist point that when I said that not all numbers were computable that because some numbers were computable it followed that I didn't understand what computable numbers are. One might suspect that he merely misunderstood the point I was making. The thing is - I have strong reason to reject the notion that he did not understand. Initially, I think he didn't. He entered into the conversation under the presumption of my idiocy because my point was counterintuitive - it tricked him into thinking I was wrong. How he handled himself afterward showed me that he knew I wasn't. When I thought deeply about his choice to make the absurdist argument with regard to computable numbers it occurred to me to be the sort of thing one would only choose to do if they understood that not all numbers were computable - understood the thrust of the proof - and wanted to deny it rather than to accept the obvious truth. It was an attempt at sophistry. By making my point with regard to not all numbers being computable seem in error, he hoped to obscure that I was correct. Simon, I strongly suspect that the reason he doesn't seem to know pertinent facts is not because he doesn't know those facts, but rather because he finds them inconvenient and because the rhetorical appeal of fanboyism is better setup by being wrong, but in a popular way.
notyourwork 4y ago
> have enormous respect for his engineering and business skills I don’t
Abishek_Muthian 4y ago
> Complaining Twitter rate-limited his API access (which would be very foolish on their part) I have recently built a Twitter application with the new V2 API. They do have undocumented API rate limits[1] while the developer documentation says something else[2]. And if you see the discussions at Twitter developer forum, It takes a while for the Twitter representative to find that the issue is because of the undocumented rate limit because it's somewhere deeply integrated into their system(But still wouldn't update the official docs). Besides the Twitter rate limit covers every Twitter application used by the user incl. their official Twitter clients. So I wouldn't be surprised if they gave Musk a privileged API token but forgot to whitelist it against their hidden, obscure rate limits; Of course this could have been noticed early on Musk's side and it's possible that they chose to attribute it to malice. [1] https://twittercommunity.com/t/undocumented-twitter-list-rate-limits/167531/33 https://twittercommunity.com/t/undocumented-twitter-list-rat... [2] https://developer.twitter.com/en/docs/twitter-api/rate-limits https://developer.twitter.com/en/docs/twitter-api/rate-limit...
- jacquesm 4y ago
  Then they could have simply communicated that fact the first time they ran into the limits and they certainly would have been lifted. This happens to me during DD all the time and it has never caused a problem or an investor/acquirer to back out of the deal.
  - hef19898 4y ago
    Out of coriousity, would Musk's legal team have to proof Twitter restricted his bandwidth out of malice? And wouldn't that be hard if they never conplaibed about to Twitter?
  - Abishek_Muthian 4y ago
    Hence I mentioned sighting rate limit seems like they wanted something as scape goat from the start. Besides, I don't think it's even possible to have something at Twitter scale without some immutable rate limits for security & reliability. I mean Musk shouldn't go all SELECT * FROM users;
seanhunter 4y ago
I agree with your analysis. This has always seemed a situation driven by ego rather than rational thought and I expect ego will prevail and we will see futile legal + PR trench warfare for a while. However, my understanding of M&A law[1] is it's not enough for him to say that the numbers are missing or even wrong. He has to say that there was a material breach caused by the fact that the numbers were missing or wrong. So if you say "I went into this deal thinking twitter had no bots and OMFGBBQ there are bots" then twitter are going to say "look at our numerous filings on bots and why not actually go on twitter at all you can see there are bots" and therefore no material breach. He has to show somehow that the failure to provide him with complete and accurate information somehow makes the deal materially worse than he could reasonably have thought going in. And that's pretty hard to prove. I believe Delaware has been very reluctant to find material breach in these sorts of circumstances. (eg even if he was to somehow prove that the bot problem was 100x worse than twitter's public statements I'm not sure that would be sufficient to prove an actual material breach given the difference in ad revenue between "lots of bots" and "hella bots all over the place" is probably not material and he knew the revenue number going in). My expectation is he wants to make it painful enough for them in court and on social media to drop the breakup fee but they have seen for ages that he was likely to attempt this and would be sued to hell and back by other shareholders if they drop the fee and therefore will strap themselves in for a fight. [1] I'm definitely not a lawyer but I have been involved in a few M&A situations and have been advised on this kind of thing by pretty good lawyers a couple of times.
- afterburner 4y ago
  The podcast Opening Arguments had two great episodes about the legal details of this deal (note the first episode doubting this deal would go through was from 2 months ago): July 4th: https://openargs.com/oa610-elons-twitter-deal-was-a-complete-blunder-its-not-happening/ https://openargs.com/oa610-elons-twitter-deal-was-a-complete... May 12: https://openargs.com/oa595-shareholders-sue-twitter-alleged-facts-jeopardize-musk-deal/ https://openargs.com/oa595-shareholders-sue-twitter-alleged-...
  - KVFinn 4y ago
    Thanks for these. Everyone else seems to be theory-crafting what will and could happen, but this is a practical, more grounded take.
fortran77 4y ago
I agree with your analysis, but I also think the numbers are bogus. Just for fun I tried buying half a million followers from some Russian guy a 7 years ago. While that number declined a bit over the years as Twitter did some trimming, I still have half of them. (Interesting some of the followers were "real" in that these were people who installed a program that ostensibly would tell them who recently followed or unfollowed them, but the program would also add followers they didn't know about. I saw many comments like "I opened twitter and for some reason I'm following 100 more people! WTF?") ... but about half of the paid followers seemed like bots.
- Lazare 4y ago
  That's an interesting story, but irrelevant to this. Twitter claims that < 5% of their "monetisable daily active users" (aka mDAU) zfd bots, where mDAU is a very specifically defined term, but broadly represents "people that Twitter thinks they can count when they sell advertising". Bots don't tend to buy things, so any bots counted in mDAU is a mistake that will piss off advertisers. (Which would be bad for Twitter, hence why the number matters.) That there are a lot of bots on Twitter is well known, and clearly true. That Twitter happily leaves most of them alone to do their own thing as long as they don't abuse the service is also well known, and quite sensible. The question is whether Twitter is good about flagging them as bots. You could have a million bots following you, but as long as Twitter has correctly noted them as bots and not counted them as mDAU, then exactly 0 count as part of the 5% bots. Nobody outside of Twitter knows who they are counting as part of their mDAU, which means nobody can cross check their numbers.
  - fortran77 4y ago
    I’m reasonably sure that these fake user bots that were created for the “buy followers” industry aren’t picked up as bots by Twitter. There’s no reason to allow such users.
    - Lazare 4y ago
      It's generally much easier to detect a bot than to detect the purpose an account was created for, so I wouldn't be so sure myself. Also consider that there's also no reason not to allow such accounts. From a business point of view, Twitter exists to sell advertising. Accurately counting the eyeballs (aka mDAU) they have to sell to advertisers is important, but policing the site otherwise makes sense strictly to the extent that failing to do so may drive some of those eyeballs away. Consider: No real human beings are likely to quit because of fake followers being left alone, but a few vain people might quit if their fake followers were removed. Further, an overly agressive ban wave targeting bots may well remove some bots people actually like which again, on the margin, may drive some real people away. Like any large company, Twitter will inevitably feel the pressure to play it safe, and in this context that means never banning an account that isn't clearly driving real users away - which means that very passive bots that don't do anything are unlikely to be banned. Of course, none of that gives us any insight into how accurately (or not) Twitter is counting mDAUs.
rbreaves 4y ago
I think many of you guys are missing the forrest from the trees here. He tanked his Tesla shares to do this deal & to no small part due to Bill Gates. I am sure this express more of his nervousness on just how much more expensive this deal was becoming as it was costing him a lot more than the list price due to him not taking into account how his other investors in his other companies would take the news. He's a smart idiot to put it kindly and a very lucky one at that despite all of his sincere and actual efforts.
- DoesntMatter22 4y ago
  What you are saying doesn't even make any sense. He tanked his Tesla shares and it's partly because of Bill Gates? Makes no sense.
- cloutchaser 4y ago
  I don't agree with the Bill gates part but you are fundamentally right. Elon signed this deal before the biggest stock market crash for about 15 years. The deal is extremely expensive for him right now in terms of tesla shares. He is just buying time and hoping tesla shares increase in the meantime. He KNOWS he HAS to complete this deal legally. That's it. It's not complicated.
deleted 4y ago
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imdsm 4y ago
mDAU being monetizable daily active users for those who are wondering
- hef19898 4y ago
  The m seems to be key, if a bot can be mobetized that bot isn't a problem.
RC_ITR 4y ago
It’s so crazy to me that the purchase price was determined by a weed joke and people are surprised that in the cold sober light of our recent correction, Musk is trying to get out of this. His whole M.O. is degrading the power of the SEC and DoJ by pointing out they have very little enforcement power. This is just another example in his long journey of “what are they going to do if I just don’t follow the rules?” Weird way for the richest man in history to live his life, but that’s probably just sour grapes on my part.
- papito 4y ago
  Musk is no different from your average "small government conservative", which basically means being anti-civilization. They won the birth lottery, and the society and the government are stopping them from going from rich to filthy rich quickly. The only thing here is that Musk happens to be fascinated with electric cars and space travel (ever since he was a teenager). We just got lucky - he could as well have gotten into opioids or coal mining, and his desire to dismantle the laws and norms would have burned even brighter.
- krisoft 4y ago
  > people are surprised that in the cold sober light of our recent correction, Musk is trying to get out of this People are not surprised. People were expecting this. As evidenced by the discussion then and now. Also as evidenced by the contract which was drafted at the time between him and twitter.
  - RC_ITR 4y ago
    > People are not surprised. Markets moved on this new. Somebody was surprised.
pavlov 4y ago
> The last paragraph, complaining about firings and hiring freezes and departures, seems positively desperate. This one comes across as particularly specious. So Musk is complaining that Twitter has been failing its obligation to “conduct its business in the ordinary course” by firing some people and slowing hiring. But there's a global slowdown going on! If Twitter hadn't taken these actions, he would be complaining about the opposite: that by not cutting costs, Twitter would be failing to conduct its business in the ordinary course in the current circumstances. There's a reason why US courts have a very high bar for M&A buyers' cold feet. They don't want to be arbitrating this kind of ridiculous arguments.
stewartmcgown 4y ago
he's mostly a fraudster who has used a cult of personality and litigation to dominate the businesses that he's involved in. check out the litigation against him for the solar city purchase by Tesla if you're interested in just how much the man is willing to defraud shareholders to personally enrich himself and his family.
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Lord_Zero 4y ago
Or maybe, and bear with me... the entire merger was in bad faith since day 1.

np1810 4y ago

Well, here's the tweet from Bret Taylor (chair of the board at Twitter)... https://mobile.twitter.com/btaylor/status/1545526087089696768 https://mobile.twitter.com/btaylor/status/154552608708969676... > "The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery."

shuckles 4y ago

Twitter has already said they'll sue for specific performance: https://twitter.com/btaylor/status/1545526087089696768 https://twitter.com/btaylor/status/1545526087089696768

elliekelly 4y ago
My heart sank when I read your comment: why on earth would the board sue for specific performance!? But my reading of the statement in the tweet is that they plan to sue for enforcement of the agreement which I believe means paying the agreed-upon penalty for backing out of the deal. I don’t at all read that statement as a plan to seek specific performance.
- howinteresting 4y ago
  The agreed-upon penalty is when both sides mutually back out of the deal. But right now Twitter's board thinks it can get a lot more out of Musk than just $1B, and my understanding is that the board is likely correct.
- agrajag 4y ago
  > closing the transaction on the price and terms agreed upon They're definitely suing for specific performance, and I'm not sure they really have any other option at this point. It would be by far in their best financial interest if they can force closing the sale, and Musk's objections seem really thin. Doing anything less than that is complete capitulation I can see them reaching a settlement to agree to cancel the deal with Musk if he agrees to pay a significant penalty ($5B+), or maybe agree to reduce the purchase price some, but why not sue for specific performance if you think you'll win?
  - elliekelly 4y ago
    Is his “financing secured”? It just seems like an incredible (and incredibly risky) long shot to me: a judge actually ordering a sale to an unwilling buyer (and Musk, of all buyers!) is a long shot and the big banks going through with funding such a big deal to an _unwilling_ owner is a long shot. But _even_if_ both of those two unlikely things happen what happens when the judge orders specific performance and Musk just... doesn’t? (Not usually a risk you have to factor in but with Musk I think this is absolutely a real possibility. Maybe even the most likely possibility.) Will they issue a warrant for his arrest? A daily fine for contempt? That would be the deal of the century for Musk. I don’t know the right answer when you’re dealing with a megalomaniac like Musk but I really don’t think specific performance is it. I am cautiously optimistic that whatever it is Musk is up to will eventually give rise to some cool new federal securities laws. Maybe even some new federal crimes! (Who am I kidding, a crime that only the wealthiest of the wealth would even be able to commit? Not in a million years!)

georgeecollins 4y ago

Right- he waived diligence. Twitter has no obligation to prove anything to him. Twitter is obligated to give him documents if they are reasonable to request and helpful for him in financial planning. If the documents Twitter has on hand are flawed or not comprehensive, that doesn't give a pretext to leave the deal. I am sure his lawyers know this and it will all be negotiated.

fundad 4y ago
How can any judgement in Twitter’s favor be enforced? Mail a bill for $1B or more and somehow collect the debt? Maybe the bank could choose to execute the purchase agreement but why would they since they (ironically) can’t force him physically show up and run Twitter. I doubt SEC has any measures they can take through Tesla which would be weird. He didn’t agree to “specific performance” expecting that to matter to him.
meragrin_ 4y ago
If Twitter fails to provide reasonable access to data necessary to secure debt to finance the purchase, it does indeed give a pretext to leave the deal. It is part of the merger agreement. You can't tell me that a lender would not want some independent assessment of Twitter's claims before lending.
- ImPostingOnHN 4y ago
  it seems he was given access to the Firehose, AKA all the data, but curiously failed to mention that in his filing (I guess it was enough, and he had no complaints?), instead complaining about rate limiting on more specific APIs (the standard Twitter API), which seem extraneous given the Firehose also, said rate limits were lifted
  - sokoloff 4y ago
    The firehose is not all the data. Twitter’s value depends heavily on human views of tweets (not part of the firehose), not on the tweets’ content (the firehose).

meragrin_ 4y ago

> Musk is saying, you haven't demonstrated your numbers are accurate. It has nothing to do with accuracy. Twitter is supposedly not providing the data: 'While Section 6.4 of the Merger Agreement requires Twitter to provide Mr. Musk and his advisors all data and information that Mr. Musk requests “for any reasonable business purpose related to the consummation of the transaction,” Twitter has not complied with its contractual obligations.' > The letter complains that Musk asked for data allowing him to "independently verify Twitter's representations regarding the number of mDAU" -- but where does the agreement provide for that verification as a condition of the deal? Section 6.11, the part of the deal where Twitter needs to provide necessary information to secure debt: 'and under Section 6.11 of the Merger Agreement, to information “reasonably requested” in connection with his efforts to secure the debt financing necessary to consummate the transaction.' I have little doubt anyone lending that kind of money would require the buyer to independently verify the mDAU.

chernevik 4y ago
I will be very surprised that Twitter's position was less than "you can have anything you want", precisely to avoid any complaint of non-cooperation. I do agree that the agreement's debt financing provisions may provide Musk an out -- "I wanted to close, but I couldn't get debt b/c you wouldn't cooperate". I'm a little surprised that Twitter agreed to any sort of financing provision, precisely because it seems to allow Musk to screw up his debt raising and then point to that as an out. But that is not a complaint in the letter, and becomes an argument about what lenders require for debt financing. Musk will have to show that lenders cared about this, and Twitter will have discovery to find evidence they didn't.
- philipwhiuk 4y ago
  > I will be very surprised that Twitter's position was less than "you can have anything you want", precisely to avoid any complaint of non-cooperation. Be very surprised, they capped the firehouse. From the filing: > Additionally, those APIs contained an artificial “cap” on the number of queries that Mr. Musk and his team can run regardless of the rate limit—an issue that initially prevented Mr. Musk and his advisors from completing an analysis of the data in any reasonable period of time. Mr. Musk raised this issue as soon as he became aware of it, in the first paragraph of the June 29 Letter: “we have just been informed by our data experts that Twitter has placed an artificial cap on the number of searches our experts can perform with this data, which is now preventing Mr. Musk and his team from doing their analysis.” That cap was not removed until July 6, after Mr. Musk demanded its removal for a second time.

hackernewds 4y ago

He's a great deal maker. But his ego, need for attention and celebrity, legitimate Twitter addiction undermines him.

StopHammoTime 4y ago

During a merger, discovery is absolutely a right the purchasing side has. The target company should open its books, your assumption about them not disclosing is incorrect.

StopHammoTime 4y ago
You guys are right, I completely missed that he waived his rights on this term. My apologies, I made an assumption (which was wrong) that Musk was acting reasonably.
HillRat 4y ago
The problem for Musk is that he filed an offer letter, which is normally what you do after due-dil, and there’s nothing in that offer that gives him a way out without pulling the MAE card, which is a pretty weak reed to rely on (though his most recent filing gamely works as many angles as possible, as you’d expect from Skadden). The buyout offer was a ridiculous move that feels like it was predicated on hurt feelings over the board debacle, but it’s not the Chancery Court’s job to protect billionaires from themselves, and Musk is generally the sort of manager that the court casts as the bad guy in the little morality plays they make of cases. Doesn’t mean they’ll compel specific performance (I’m skeptical that an equity court is going to see that as the best option, not least because it’s not clear to me Musk would have enough cash to operate the company if the sale went through under current market conditions), but I suspect that, after protracted negotiations and litigation, either the board will accept a modest haircut on the offer (again, due to market conditions), or the court will award liquidated damages ($1bn) plus possibly some additional damages if Twitter wants to argue that Musk violated the confidentiality and nondisparagement provisions of the deal. (If the former, I suspect that we’ll see a bunch of strike suits from aggrieved shareholders land in court anyway, so buckle up for a lot of litigation regardless.)
thelamest 4y ago
No it’s not. See e.g. https://twitter.com/matt_levine/status/1545152093501227009 https://twitter.com/matt_levine/status/1545152093501227009, https://twitter.com/MorganRicks1/status/1545404990457536512 https://twitter.com/MorganRicks1/status/1545404990457536512. In what meaning are you even using the term?

random314 4y ago

> I have enormous respect for his engineering He has never demonstrated engineering skills. He has always been a business manager. But with all of the business comedy he has performed this year, I am beginning to doubt his business skills too. Perhaps it's the VPs under him who managed the business well, while Elon remained the PR front person and primary investor. Much like SpaceX.

simondotau 4y ago
Elon Musk is literally the Chief Engineer at SpaceX. His technical proficiency is validated by other senior engineers who work there, as well as senior engineers at NASA. There are also countless hours of unedited footage of him demonstrating his deep technical understanding of rocket engineering. https://www.reddit.com/r/SpaceXLounge/comments/k1e0ta/evidence_that_musk_is_the_chief_engineer_of_spacex/ https://www.reddit.com/r/SpaceXLounge/comments/k1e0ta/eviden... https://www.youtube.com/watch?v=hIPLmZK3C1Y https://www.youtube.com/watch?v=hIPLmZK3C1Y
- JoshCole 4y ago
  You seem to think he doesn't know the facts, but I suspect that he does. He just doesn't care about facts or truth. He is the sort of person who likes to win debates and get hits on people he dislikes. So trying to correct him on these points is a waste of your time. I say this from experience with him. I've tried talking to him before. I shared about something I find so very fascinating - that approximation via abstraction is provably better than perfection in many learning situations because of its relationship with computational complexity. He asked for proof; I provided it. I won't repeat the proof here, but know that this isn't an obscure and unknown result - here is Peter Norvig in Artificial Intelligence: A Modern Approach discussing related ideas: > Page 172. "One way to deal with this huge number is with abstraction: i.e. by treating similar hands as identical. For example, it is very important which aces and kings are in a hand, but whether hand has a 4 or a 5 is not as important, and can be abstracted away." > Page 173. "Because calculating optimal decisions in complex games is intractable, all algorithms must make some assumptions and approximations." I earnestly engaged with random314 on this topic. He ultimately concluded that he had won the argument, taught me something, and condescended that I ought to have known better than to have talked with him. Along the way he compared me with people he found foolish, claimed I was incoherent in order to avoid addressing my points, gaslit with regard to the thread topic, accused me of jargon, and even made the absurdist point that when I said that not all numbers were computable that because some numbers were computable it followed that I didn't understand what computable numbers are. One might suspect that he merely misunderstood the point I was making. The thing is - I have strong reason to reject the notion that he did not understand. Initially, I think he didn't. He entered into the conversation under the presumption of my idiocy because my point was counterintuitive - it tricked him into thinking I was wrong. How he handled himself afterward showed me that he knew I wasn't. When I thought deeply about his choice to make the absurdist argument with regard to computable numbers it occurred to me to be the sort of thing one would only choose to do if they understood that not all numbers were computable - understood the thrust of the proof - and wanted to deny it rather than to accept the obvious truth. It was an attempt at sophistry. By making my point with regard to not all numbers being computable seem in error, he hoped to obscure that I was correct. Simon, I strongly suspect that the reason he doesn't seem to know pertinent facts is not because he doesn't know those facts, but rather because he finds them inconvenient and because the rhetorical appeal of fanboyism is better setup by being wrong, but in a popular way.

notyourwork 4y ago

> have enormous respect for his engineering and business skills I don’t

Abishek_Muthian 4y ago

> Complaining Twitter rate-limited his API access (which would be very foolish on their part) I have recently built a Twitter application with the new V2 API. They do have undocumented API rate limits[1] while the developer documentation says something else[2]. And if you see the discussions at Twitter developer forum, It takes a while for the Twitter representative to find that the issue is because of the undocumented rate limit because it's somewhere deeply integrated into their system(But still wouldn't update the official docs). Besides the Twitter rate limit covers every Twitter application used by the user incl. their official Twitter clients. So I wouldn't be surprised if they gave Musk a privileged API token but forgot to whitelist it against their hidden, obscure rate limits; Of course this could have been noticed early on Musk's side and it's possible that they chose to attribute it to malice. [1] https://twittercommunity.com/t/undocumented-twitter-list-rate-limits/167531/33 https://twittercommunity.com/t/undocumented-twitter-list-rat... [2] https://developer.twitter.com/en/docs/twitter-api/rate-limits https://developer.twitter.com/en/docs/twitter-api/rate-limit...

jacquesm 4y ago
Then they could have simply communicated that fact the first time they ran into the limits and they certainly would have been lifted. This happens to me during DD all the time and it has never caused a problem or an investor/acquirer to back out of the deal.
- hef19898 4y ago
  Out of coriousity, would Musk's legal team have to proof Twitter restricted his bandwidth out of malice? And wouldn't that be hard if they never conplaibed about to Twitter?
- Abishek_Muthian 4y ago
  Hence I mentioned sighting rate limit seems like they wanted something as scape goat from the start. Besides, I don't think it's even possible to have something at Twitter scale without some immutable rate limits for security & reliability. I mean Musk shouldn't go all SELECT * FROM users;

seanhunter 4y ago

I agree with your analysis. This has always seemed a situation driven by ego rather than rational thought and I expect ego will prevail and we will see futile legal + PR trench warfare for a while. However, my understanding of M&A law[1] is it's not enough for him to say that the numbers are missing or even wrong. He has to say that there was a material breach caused by the fact that the numbers were missing or wrong. So if you say "I went into this deal thinking twitter had no bots and OMFGBBQ there are bots" then twitter are going to say "look at our numerous filings on bots and why not actually go on twitter at all you can see there are bots" and therefore no material breach. He has to show somehow that the failure to provide him with complete and accurate information somehow makes the deal materially worse than he could reasonably have thought going in. And that's pretty hard to prove. I believe Delaware has been very reluctant to find material breach in these sorts of circumstances. (eg even if he was to somehow prove that the bot problem was 100x worse than twitter's public statements I'm not sure that would be sufficient to prove an actual material breach given the difference in ad revenue between "lots of bots" and "hella bots all over the place" is probably not material and he knew the revenue number going in). My expectation is he wants to make it painful enough for them in court and on social media to drop the breakup fee but they have seen for ages that he was likely to attempt this and would be sued to hell and back by other shareholders if they drop the fee and therefore will strap themselves in for a fight. [1] I'm definitely not a lawyer but I have been involved in a few M&A situations and have been advised on this kind of thing by pretty good lawyers a couple of times.

afterburner 4y ago
The podcast Opening Arguments had two great episodes about the legal details of this deal (note the first episode doubting this deal would go through was from 2 months ago): July 4th: https://openargs.com/oa610-elons-twitter-deal-was-a-complete-blunder-its-not-happening/ https://openargs.com/oa610-elons-twitter-deal-was-a-complete... May 12: https://openargs.com/oa595-shareholders-sue-twitter-alleged-facts-jeopardize-musk-deal/ https://openargs.com/oa595-shareholders-sue-twitter-alleged-...
- KVFinn 4y ago
  Thanks for these. Everyone else seems to be theory-crafting what will and could happen, but this is a practical, more grounded take.

fortran77 4y ago

I agree with your analysis, but I also think the numbers are bogus. Just for fun I tried buying half a million followers from some Russian guy a 7 years ago. While that number declined a bit over the years as Twitter did some trimming, I still have half of them. (Interesting some of the followers were "real" in that these were people who installed a program that ostensibly would tell them who recently followed or unfollowed them, but the program would also add followers they didn't know about. I saw many comments like "I opened twitter and for some reason I'm following 100 more people! WTF?") ... but about half of the paid followers seemed like bots.

Lazare 4y ago
That's an interesting story, but irrelevant to this. Twitter claims that < 5% of their "monetisable daily active users" (aka mDAU) zfd bots, where mDAU is a very specifically defined term, but broadly represents "people that Twitter thinks they can count when they sell advertising". Bots don't tend to buy things, so any bots counted in mDAU is a mistake that will piss off advertisers. (Which would be bad for Twitter, hence why the number matters.) That there are a lot of bots on Twitter is well known, and clearly true. That Twitter happily leaves most of them alone to do their own thing as long as they don't abuse the service is also well known, and quite sensible. The question is whether Twitter is good about flagging them as bots. You could have a million bots following you, but as long as Twitter has correctly noted them as bots and not counted them as mDAU, then exactly 0 count as part of the 5% bots. Nobody outside of Twitter knows who they are counting as part of their mDAU, which means nobody can cross check their numbers.
- fortran77 4y ago
  I’m reasonably sure that these fake user bots that were created for the “buy followers” industry aren’t picked up as bots by Twitter. There’s no reason to allow such users.
  - Lazare 4y ago
    It's generally much easier to detect a bot than to detect the purpose an account was created for, so I wouldn't be so sure myself. Also consider that there's also no reason not to allow such accounts. From a business point of view, Twitter exists to sell advertising. Accurately counting the eyeballs (aka mDAU) they have to sell to advertisers is important, but policing the site otherwise makes sense strictly to the extent that failing to do so may drive some of those eyeballs away. Consider: No real human beings are likely to quit because of fake followers being left alone, but a few vain people might quit if their fake followers were removed. Further, an overly agressive ban wave targeting bots may well remove some bots people actually like which again, on the margin, may drive some real people away. Like any large company, Twitter will inevitably feel the pressure to play it safe, and in this context that means never banning an account that isn't clearly driving real users away - which means that very passive bots that don't do anything are unlikely to be banned. Of course, none of that gives us any insight into how accurately (or not) Twitter is counting mDAUs.

rbreaves 4y ago

I think many of you guys are missing the forrest from the trees here. He tanked his Tesla shares to do this deal & to no small part due to Bill Gates. I am sure this express more of his nervousness on just how much more expensive this deal was becoming as it was costing him a lot more than the list price due to him not taking into account how his other investors in his other companies would take the news. He's a smart idiot to put it kindly and a very lucky one at that despite all of his sincere and actual efforts.

DoesntMatter22 4y ago
What you are saying doesn't even make any sense. He tanked his Tesla shares and it's partly because of Bill Gates? Makes no sense.
cloutchaser 4y ago
I don't agree with the Bill gates part but you are fundamentally right. Elon signed this deal before the biggest stock market crash for about 15 years. The deal is extremely expensive for him right now in terms of tesla shares. He is just buying time and hoping tesla shares increase in the meantime. He KNOWS he HAS to complete this deal legally. That's it. It's not complicated.

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imdsm 4y ago

mDAU being monetizable daily active users for those who are wondering

hef19898 4y ago
The m seems to be key, if a bot can be mobetized that bot isn't a problem.

RC_ITR 4y ago

It’s so crazy to me that the purchase price was determined by a weed joke and people are surprised that in the cold sober light of our recent correction, Musk is trying to get out of this. His whole M.O. is degrading the power of the SEC and DoJ by pointing out they have very little enforcement power. This is just another example in his long journey of “what are they going to do if I just don’t follow the rules?” Weird way for the richest man in history to live his life, but that’s probably just sour grapes on my part.

papito 4y ago
Musk is no different from your average "small government conservative", which basically means being anti-civilization. They won the birth lottery, and the society and the government are stopping them from going from rich to filthy rich quickly. The only thing here is that Musk happens to be fascinated with electric cars and space travel (ever since he was a teenager). We just got lucky - he could as well have gotten into opioids or coal mining, and his desire to dismantle the laws and norms would have burned even brighter.
krisoft 4y ago
> people are surprised that in the cold sober light of our recent correction, Musk is trying to get out of this People are not surprised. People were expecting this. As evidenced by the discussion then and now. Also as evidenced by the contract which was drafted at the time between him and twitter.
- RC_ITR 4y ago
  > People are not surprised. Markets moved on this new. Somebody was surprised.

pavlov 4y ago

> The last paragraph, complaining about firings and hiring freezes and departures, seems positively desperate. This one comes across as particularly specious. So Musk is complaining that Twitter has been failing its obligation to “conduct its business in the ordinary course” by firing some people and slowing hiring. But there's a global slowdown going on! If Twitter hadn't taken these actions, he would be complaining about the opposite: that by not cutting costs, Twitter would be failing to conduct its business in the ordinary course in the current circumstances. There's a reason why US courts have a very high bar for M&A buyers' cold feet. They don't want to be arbitrating this kind of ridiculous arguments.

stewartmcgown 4y ago

he's mostly a fraudster who has used a cult of personality and litigation to dominate the businesses that he's involved in. check out the litigation against him for the solar city purchase by Tesla if you're interested in just how much the man is willing to defraud shareholders to personally enrich himself and his family.

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Lord_Zero 4y ago

Or maybe, and bear with me... the entire merger was in bad faith since day 1.