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There's been a lot of speculating around here on exactly what it would take for Musk to get out of this deal; here's the TLDR of the analysis from Levine: > Mu
by theptip 4y ago
There's been a lot of speculating around here on exactly what it would take for Musk to get out of this deal; here's the TLDR of the analysis from Levine:
> Musk cannot get out of the deal just because one of Twitter’s representations is false. He still has to close the deal unless the representation is false and it would have a “material adverse effect” on Twitter. This is a famously under-defined term but it generally needs to be a pretty catastrophic effect. If the bots are 6% of mDAUs, whatever. If the bots are 75% of mDAUs and Twitter has been knowingly misleading its advertisers, and Musk can expose that scam and advertisers flee and Twitter faces legal trouble for its fraud, then, sure, material adverse effect.
As to whether there is any evidence of a false representation (not even addressing material adverse effect due to that false representation):
> The only basis for the claim is that “preliminary analysis by Mr. Musk’s advisors of the information provided by Twitter to date causes Mr. Musk to strongly believe that the proportion of false and spam accounts included in the reported mDAU count is wildly higher than 5%.” Notice that Ringler does not say that the analysis shows that the bots are “wildly higher than 5%” of mDAUs: That would be a factual claim that, I suspect, Musk’s advisers know is false. They make only the subjective claim that Musk “strongly believes” it.
And then, perhaps the better grounds for Musk to prevail:
> The second pretext is: Twitter is not giving Musk enough information about the bot problem. This is a better pretext, for technical legal reasons, which we have also discussed previously. In the closing conditions to the merger, representations are qualified by “material adverse effect”; just finding that a representation is false would not give Musk the right to terminate the deal unless it caused an MAE. But covenants are qualified by “all material respects”: In the merger agreement, Twitter promised to do certain things between signing and closing, and it has to do those things, whether or not there would be a material adverse effect from not doing them. So if Musk can prove that Twitter hasn’t complied with its obligations, he can get out of the deal.
- Turing_Machine 4y ago> If the bots are 6% of mDAUs, whatever. It seems like the purchase price should be of the order of 6% less in that case. 6% of $44 billion is not a trivial amount of money.
- govg 4y agoThese are figured that Twitter has been filing with the SEC for ages. How does it make sense if the purchase was agreed upon when all this was public information?
- theptip 4y agoThis isn’t how “material adverse event” works, which is the term that was written into the contract that Musk signed. Normally “is the mDAU figure correct” is the kind of thing you answer before you sign the merger agreement and lock in your purchase price. Also note that the baseline in SEC filings was 5% bots, so 6% is only 1pp higher. The claim was never that it was zero.
- KKdU9EXbBhmLznR 4y agoExcept that he knew that it was at least 5%. So you'd actually have to figure out how much the discount already included in the value is for that 5% (which is highly subjective, but the discount is almost certainly not also 5%), and then multiply it by six-fifths (maybe, because the discount is also almost certainly not linear). Of course, this is all a moot point, because what an actual businessman (as opposed to a con artist) would do, if they were concerned the bot stats might be inaccurate, is make sure the agreement had specific terms in it as to what would happen if it was found to be inaccurate.
- danaris 4y ago> It seems like the purchase price should be of the order of 6% less in that case. That's not what his contract says. Either the bots are pretty close to the 5% figure Twitter says (and 6% is definitely pretty close), and Elon has to buy at the figure he specified, or they're enough higher to have a significant impact on ad revenue, and Elon doesn't have to buy at all.
- russdill 4y agoDo public statements before he signed the deal that imply that he was aware that Twitter has a bot problem and already suspected that the number we much higher than reported by Twitter have any effect?
- tptacek 4y agoIt's kind of a moot point; Levine is reading tea leaves about what a judge will think hearing all of this, but the fact is that Musk waived the right to condition the acquisition on Twitter's bot statistics, pretty much in black and white.
- Barrin92 4y agowasn't that literally the reason he claimed he wanted to buy it for in the first place? I remember him going on about verifying every human on twitter and improving our discourse the thing he's pretending to ditch the deal for was the thing he allegedly wanted to fix
- sroussey 4y agoAnd wrote it in the SEC filed docs.
- theptip 4y agoLevine certainly thinks this is true.