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I think Musk's counterclaims are more interesting than Twitter's response. Here's the summary of the five counterclaims: * Twitter committed fraud by lying to

I think Musk's counterclaims are more interesting than Twitter's response. Here's the summary of the five counterclaims: * Twitter committed fraud by lying to the SEC about the mDAU numbers with the intent of inducing Musk to buy Twitter at an inflated price. No, really, this is the allegation (see paragraphs 202-206). * Count 2 is that Twitter committed [Texas fraud statute] by lying when it offered its shares. It's shotgun-pled, so I don't know which specific statements are supposed to be wrong, but I'm imagining it's basically the previous count recast under a different statute. * Count 3 says that Twitter broke the contract by failing to provide information. * Count 4 says that Twitter broke the contract by instituting a hiring freeze. [not gonna fly, especially when Musk admitted that Twitter gave him warning of what it was doing and Musk didn't respond. Did I mention that Musk's answer admits far more than I would have expected?] * Count 5 is pretty please declare that Twitter lying about mDAUs is a materially adverse event that is cause to break the contract. I still can't get over the banana-pants insanity of the first count... arguing that Twitter lied about its numbers for years specifically so that someone would buy it at an inflated price?

nomel 4y ago
> I still can't get over the banana-pants insanity of the first count As someone who's unfamiliar with this, could you explain what's banana-pants insane about a company inflating their hard-to-discover numbers, for profit? I thought that was, unfortunately, banana-pants standard? For example, the fiction that is Twitter or Reddit's user count.
- jjeaff 4y ago
  Whether they inflated their numbers or not, the burden would be on Musk to prove that and it would be completely impossible to do that with a 3rd party tool. You are a monetizable user on Twitter if you just log in and read tweets. Something that no 3rd party tool could possibly track.
  - zinekeller 4y ago
    > You are a monetizable user on Twitter if you just log in and read tweets. Actually, even logged-out users (until they forced everyone to log in to read timelines) are monetizable, so Musk is really trying to make something to get out.
    - eastbound 4y ago
      I’m surprised that someone clever enough to run a business, takes that excuse to get out of a deal. He must have been tired. Any businessman who gets into such a position, even by mistake, would have at least taken this opportunity to require Twitter’s methodology on counting bots an expose its flaws. The claim would be something tangible like “This account is a bot and your criteria falsely counts it as a user.” Not “Really there are 5% bots? Everybody, look!” He looks more like an engineer who can’t stand the fact that ballpark numbers are a decent way to do business in a lot of cases.
      - evan_ 4y ago
        Another explanation could be, he’s not actually that good at running a business
      - plorg 4y ago
        A large portion of Twitter's complaint is describing how many times they tried to explain their methodology to him, including in written documentation that he admits he didn't read.
  - lokar 4y ago
    No, the burden is not on Musk to prove anything. He waived all rights to due diligence. There is nothing to prove or disprove.
- jcranmer 4y ago
  Twitter is a public company (and has been for 9 years), and has maintained the 5% mDAU disclaimer in its required annual reports for years. I don't know off-hand how long it's been doing so, but probably at least 4 or 5 years. The allegation is saying not only that Twitter has been lying about that number--for years, on documents that land it in legal hot water if it's been lying--but that it was doing so specifically so that Musk would buy Twitter at an inflated price. The insane part is really that specific intent, not the lying about the numbers.
  - flerchin 4y ago
    Well twitter would have been obscuring bots to obtain an inflated purchase price _by anyone_.
  - thr0wawayf00 4y ago
    FWIW, academic research has questioned the 5% number for years. USC and IU put out a report 5 years ago that believed the upper bound for fake accounts was 15%[0]. This isn't a new allegation. 0: https://www.cnbc.com/2017/03/10/nearly-48-million-twitter-accounts-could-be-bots-says-study.html https://www.cnbc.com/2017/03/10/nearly-48-million-twitter-ac...
    - jcranmer 4y ago
      As explained many times by many people, the 5% is not the number of bots on Twitter. It is the false negative rate of Twitter's bot detection algorithms.
    - kergonath 4y ago
      From your source: > our estimates suggest that between 9% and 15% of active Twitter accounts are bots From Twitter: “roughly 5% of our monetizable daily users are bots”. Both can be true at the same time, and it does not mean that Twitter lied.
      - dahdum 4y ago
        Twitter's lawsuit mentions this, stating only they know who is monetizable. IIRC Musk's lawyers deliberately push the same false equivalency in their filing.
- benj111 4y ago
  The fact that musk tweeted that he was buying Twitter to fix the bot problem. So the fact that he's using his reason for buying to try and get out of buying seems... Insane.
- phailhaus 4y ago
  It's insane because Twitter has been very careful to explain that the 5% number is not some sort of "promise". > 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. They covered themselves very clearly, and Musk has no standing here. He knew this, and decided to waive his due diligence and buy anyways. [1] https://www.sec.gov/Archives/edgar/data/1418091/000141809120000199/twtrq320ex992.htm https://www.sec.gov/Archives/edgar/data/1418091/000141809120...
  - 8ytecoder 4y ago
    He claimed to buy Twitter, specifically, to clean it up; to get rid of bots. That was his stated goal. "If our twitter bid succeeds, we will defeat the spam bots or die trying!" https://twitter.com/elonmusk/status/1517215066550116354 https://twitter.com/elonmusk/status/1517215066550116354
    - kennxfl 4y ago
      Apparently Twitter subpoenaed Musk's friends and colleagues who were actively tweeting about the deal with what is believed to be an attempt to prove he encouraged his posse tweet negatively to force a lower price.
      - threeseed 4y ago
        David Sachs, prominent VC was one of those subpoenaed and he definitely seemed a little sensitive about it: https://twitter.com/DavidSacks/status/1554258141876932608 https://twitter.com/DavidSacks/status/1554258141876932608
        SilverBirch 4y ago
        [flagged]
- daed 4y ago
  One point not mentioned (and I’m just paraphrasing Levine from Money Stuff here): It’s crazy because it would probably be BETTER if you had more bots. Then you could say that your revenue per user was higher and you could argue that you had more room for growth. So, if anything, lying and OVERestimating the bot count would help your valuation more.
  - Ferret7446 4y ago
    Not really, because the revenue comes from ads not users. Twitter makes profit from ad buyers thinking they are reaching many users. The "revenue per user was higher" you mention is actually "cost per ad impression" and ad buyers want that to be low.
    - Sebb767 4y ago
      Ad buyers want this to be lower, but investors would love for this to be higher. I think that's what the parent was aiming at.
- fooey 4y ago
  There's a whole assumption that bots are a net negative to the platforms value besides any arguments over how many of them there are. As a human, it's annoying to get get a reply notification only to discover it was bot spam, but from the platform perspective that bot just created user activity and content for you for free. I have a theory that the most embarrassing thing to come out of this might be that Twitter doesn't really care about bots much more than issuing platitudes that they care about bots to assuage the user base.
  - blackoil 4y ago
    If there are too many bot activities, user may completely turn off notifications and reduce the usage.
  - ryantgtg 4y ago
    I have like 9 twitter bots and they’re all cool and interesting. I wonder if Musk’s tool differentiates between cool and uncool bots. In the past I tried to write bots that do things like reply to people, but that is a violation of the TOS and twitter would immediately identify and ban the account.
    - fooey 4y ago
      The tool he used to identify bots identified his own account as a bot, so I'm gonna go out on a limb and guess it's not very intelligent (or is hyper-intelligent)
      - hef19898 4y ago
        At that level of intelligence I bet it can drive a car.
- deleted 4y ago
  [deleted]
Sebb767 4y ago
> arguing that Twitter lied about its numbers for years specifically so that someone would buy it at an inflated price? On one hand, venture-funded hockeystick-startups like Twitter definitely aim for a quick exit to make cash, so it's not totally out of the blue. On the other hand, Twitter is publicly traded and therefore already had its exit.
- mywittyname 4y ago
  And the Twitter board was also very much publicly saying, "don't buy us."
  - Sebb767 4y ago
    Clearly reverse psychology, confirming that this was indeed their play all along!
    - meepmorp 4y ago
      You joke, but expect to see this very idea put forward in all seriousness as this whole thing plays out. Likely by Musk fans, etc., but still.
      - Sebb767 4y ago
        I'm very much looking forward to my "I called it!" moment :-)
- nerdawson 4y ago
  There will be members of staff who’s job depends on the value of the stock and countless more with total comp tied to it.
nerdawson 4y ago
Wouldn’t the first count apply to anyone interested in buying shares in Twitter? Artificially inflating the mDAU figure makes the investment appear more attractive and valuable than it really is.
- piker 4y ago
  Seems like this is the correct answer. Musk is just putting himself in that class.
zinekeller 4y ago
> Twitter committed fraud by lying to the SEC about the mDAU numbers with the intent of inducing Musk to buy Twitter at an inflated price. What is that commonly-used aphorism? "One man's trash is another man's treasure"? Like, even if this is true, Musk didn't do (and subsequently waived) due diligence. > No, really, this is the allegation No further comment on it. > Count 2 is that Twitter committed [Texas fraud statute] by lying when it offered its shares. It's shotgun-pled, so I don't know which specific statements are supposed to be wrong, but I'm imagining it's basically the previous count recast under a different statute. If it's due to Texas laws, is the appropriate jurisdiction is the Texas courts or... oh, he's trying to claim that the case should be heard in a federal court (for diversity reasons). Good luck though Musk. > Count 3 says that Twitter broke the contract by failing to provide information. What information? The contract is already in the public, but okay you want to waste court time. > Count 4 says that Twitter broke the contract by instituting a hiring freeze. Twitter could just point to its peers like Google, Meta and Microsoft. > Count 5 is pretty please declare that Twitter lying about mDAUs is a materially adverse event that is cause to break the contract. Yeah, at this point I'm convinced that Musk wants to just waste everyone's time, especially after the chancery court denied his petition to schedule the hearing next year.
- Sebb767 4y ago
  > What information? The contract is already in the public, but okay you want to waste court time. The contract stated that Twitter had to provide Musk with internal data as required to close the deal. His teams tokens were apparently rate-limited at some point and it took a while for Twitter to give him access to all data, a.k.a. 'the firehose'. Just for completeness sake, Twitter seemed to still try (the token thing was probably a technical error) and whether giving him access to the firehose was actually necessary could even be contested, as he arguably wanted to use the data to not close the deal.
  - zinekeller 4y ago
    Quite derailing a bit, but Twitter executives are also saying that it tries to protect Twitter since that Musk indicated that he will launch a rival platform. Honestly this particular part sounds like Stac v. Microsoft (https://en.wikipedia.org/wiki/Stac_v._Microsoft https://en.wikipedia.org/wiki/Stac_v._Microsoft)
mayank 4y ago
> I still can't get over the banana-pants insanity of the first count... arguing that Twitter lied about its numbers for years specifically so that someone would buy it at an inflated price? Not a lawyer, so could you explain why this is banana-pants insanity? There's malicious fraud (unlikely) and then there's the more likely case of under-investing in bot-detection and expunging efforts, e.g. "in favor of other priorities", to keep DAUs and subsequently valuations high for a potential sale.
- Invictus0 4y ago
  Twitter's methodology for checking bot accounts is clear, consistent, and has been detailing in its SEC filings for years. Anyone that cared could have easily double checked them. Recalling from memory, all they did is take a random sampling of accounts and have a human rate the accounts as a bot or not--back when Twitter had an API it would have been even easier to do this.
  - jsnell 4y ago
    No. Nobody outside of Twitter can repeat the analysis. First, only Twitter knows which users are active (the population being analyzed are the DAUs). People doing bot analysis from publicly available define activity based on the account tweeting, which will probably skew heavily toward spam bots. Second, the mDAU metric is the DAUs with known bots having been removed. Nobody outside of Twitter knows which active accounts were excluded by Twitter from the metric. Even if 50% of Twitter DAUs are bots, as long as Twitter detects 90% of them as bots and marks them as non-monetized, the 5% number stands. Third, nobody outside of Twitter can actually do a proper job of evaluating whether an account is a bot, since they have orders of magnitude more signals than a simple tweet stream / public profile information. Twitters methology is far better than any publicly available bot detection would be, but the flipside is that it's not a replicable methodology.
    - kergonath 4y ago
      They must have some internal documentation though, and the process can be looked at during the trial, right? So it cannot be replicated by third parties, and Musk does not know what he’s talking about (shocker!), but it can be verified a posteriori. And I assume it will be at some point.
mywittyname 4y ago
This provides a lot of insight into how that man got to the top. He clearly has no qualms about lying and bullshitting his way into and out of anything and no amount of proof to the contrary will ever get him to admit he was wrong. I guess this is similar to the "reality distortion field" people claim Jobs had. Except the examples given there were more of him not believing people who said something couldn't be done.
- kergonath 4y ago
  Jobs’ RDF was a manifestation of his charisma: he could make people think something really hard was actually easy (when dealing with engineers and designers) or the other way around (when dealing with customers). Jobs did bullshit, but AFAIK more on the design and marketing side than on the business side (give or take the backdated stock option thing and his first stint at Apple, when he wasn’t in control). Certainly nothing like Musk’s shenanigans.
  - cma 4y ago
    > (give or take the backdated stock option thing and his first stint at Apple, when he wasn’t in control). Certainly nothing like Musk’s shenanigans. Don't forget Jobs' prime role in having companies collude together to depress wages by not recruiting each other's employees: https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L... "an interconnected web of express agreements, each with the active involvement and participation of a company under the control of Steve Jobs...and/or a company that shared at least one member of Apple's board of directors."
    - kergonath 4y ago
      > Don't forget Jobs' prime role in having companies collude together to depress wages by not recruiting each other's employees Yes, indeed! I forgot to mention that.
- benj111 4y ago
  I reach the opposite conclusion. He offers to buy twitter on a whim, then changes his mind after signing a contract. That doesn't really seem like a good way of getting to the top.
linuxftw 4y ago
> I still can't get over the banana-pants insanity of the first count... arguing that Twitter lied about its numbers for years specifically so that someone would buy it at an inflated price? This describes the entire business model of WeWork (minus the self-dealing), why should Twitter be different?
- kergonath 4y ago
  Hmm tough question… Maybe because they are not the same company, are not managed by the same people, and do not have the same business model? Just a guess…
Invictus0 4y ago
What's so interesting about it? It's total nonsense dressed up in legalese.
codingdave 4y ago
I don't honestly believe either side cares about the merits of the legal case - this is all just a very public and showy exercise to negotiate on a new price during a settlement.
- koheripbal 4y ago
  That's the nature of almost all civil cases - they are pretexts for negotiations. BUT, accusing Twitter of actual federal and state crimes is going to raise the awareness of several regulatory bodies, so this is going to get hairy.
  - _djo_ 4y ago
    No it won’t, because those are baseless allegations thrown out in order to add more noise and confusion. You might get some red state DA eager for some publicity to make a song and dance about it for a bit, but that’s it. If Musk’s team could produce actual data and evidence of criminal law breaches they’d be reporting them to authorities not adding them as minor points in a civil suit filing in Delaware.
- dahdum 4y ago
  Twitter has the facts and the law on their side, so they most certainly care about the merits.
  - meepmorp 4y ago
    When the facts are on your side, pound the facts. When the law is on your side, pound the law. When neither is on you side, pound the table.
- nemothekid 4y ago
  >I don't honestly believe either side cares about the merits of the legal case TWTR is only down 1.6% YTD. * SNAP is down 80% * PINS is down 40% * FB is down 50% A good chunk of TWTR's current valuation is now being propped up by Elon's buyout offer. Elon could be looking at paying a 100-125% premium on what should be the fair market value for Twitter. Twitter's board should care deeply about getting as much value here as possible.
leobg 4y ago
> arguing that Twitter lied about its numbers for years specifically so that someone would buy it at an inflated price? I don’t think that’s the argument. Twitter is an ad supported business. As such, the incentive is to count the “monthly active users” rather higher than lower. Specifically, there us no incentive to make an effort to exclude automated accounts from that number at all.
gfodor 4y ago
The point to me seems to be to set up things where this won’t go to court: if the primary claim is that Twitter misstated mDAU, the downside risk to Twitter is far greater than to Musk (I think) to have that fact finding occur. If it turns out the court agrees with Musk, then in one swoop the deal falls through, Musk is vindicated, the reputation of Twitter’s entire executive leadership and board is permanently damaged, and the market will punish the hell out of the stock due to the first and higher order impact of this on their valuation. The choice for Twitter boils down to what level of price cut are they willing to make to remove that possibility.
- _djo_ 4y ago
  Twitter seems pretty confident about revealing their process to calculate that figure: They’ve described it multiple times and been explicit in their SEC filings. As they should have been, as it’s a sound enough process given constraints and doesn’t need to be 100% accurate. They have nothing to worry about.
  - gfodor 4y ago
    I've been downvoted but what you state is exactly right: they have to decide exactly how confident they are in their own process holding up in court (which isn't exactly the same thing as it being accurate) - and to whatever degree they are not confident, back it out to a price change to de-risk the outcome I mentioned. I agree with you that they seem confident, but the entire back and forth around mDAU originated with Musk and my belief is that choice of dispute was taken in the interest of setting things up so they won't actually go to court. The gambit of course may fail and it may go to court.
    - _djo_ 4y ago
      They’re going to court, because Twitter holds all the cards here and have the strongest legal case, so it’s in their best interests to have this adjudicated by a Delaware court. Musk is trying to pretend the mDAU = number of active bots. It’s dishonest, and likely designed to hurt the company and tank its share price and therefore bully it into conceding. Given the strength of their case I don’t see that happening.
lefrenchy 4y ago
> Twitter committed fraud by lying to the SEC about the mDAU numbers with the intent of inducing Musk to buy Twitter at an inflated price. LOL, their SEC filings basically say “these are our numbers but they’re highly subjective and could be way off”. Musk is either a liar or an idiot.
- foobiekr 4y ago
  Both.
dawnerd 4y ago
And keep in mind: Twitter wasn’t out there soliciting a sale. Elon came along and pretty much demanded he own it. Twitter tried to stop but he persisted. Should be a pretty clear cut case imo

nomel 4y ago

> I still can't get over the banana-pants insanity of the first count As someone who's unfamiliar with this, could you explain what's banana-pants insane about a company inflating their hard-to-discover numbers, for profit? I thought that was, unfortunately, banana-pants standard? For example, the fiction that is Twitter or Reddit's user count.

jjeaff 4y ago
Whether they inflated their numbers or not, the burden would be on Musk to prove that and it would be completely impossible to do that with a 3rd party tool. You are a monetizable user on Twitter if you just log in and read tweets. Something that no 3rd party tool could possibly track.
- zinekeller 4y ago
  > You are a monetizable user on Twitter if you just log in and read tweets. Actually, even logged-out users (until they forced everyone to log in to read timelines) are monetizable, so Musk is really trying to make something to get out.
  - eastbound 4y ago
    I’m surprised that someone clever enough to run a business, takes that excuse to get out of a deal. He must have been tired. Any businessman who gets into such a position, even by mistake, would have at least taken this opportunity to require Twitter’s methodology on counting bots an expose its flaws. The claim would be something tangible like “This account is a bot and your criteria falsely counts it as a user.” Not “Really there are 5% bots? Everybody, look!” He looks more like an engineer who can’t stand the fact that ballpark numbers are a decent way to do business in a lot of cases.
    - evan_ 4y ago
      Another explanation could be, he’s not actually that good at running a business
    - plorg 4y ago
      A large portion of Twitter's complaint is describing how many times they tried to explain their methodology to him, including in written documentation that he admits he didn't read.
- lokar 4y ago
  No, the burden is not on Musk to prove anything. He waived all rights to due diligence. There is nothing to prove or disprove.
jcranmer 4y ago
Twitter is a public company (and has been for 9 years), and has maintained the 5% mDAU disclaimer in its required annual reports for years. I don't know off-hand how long it's been doing so, but probably at least 4 or 5 years. The allegation is saying not only that Twitter has been lying about that number--for years, on documents that land it in legal hot water if it's been lying--but that it was doing so specifically so that Musk would buy Twitter at an inflated price. The insane part is really that specific intent, not the lying about the numbers.
- flerchin 4y ago
  Well twitter would have been obscuring bots to obtain an inflated purchase price _by anyone_.
- thr0wawayf00 4y ago
  FWIW, academic research has questioned the 5% number for years. USC and IU put out a report 5 years ago that believed the upper bound for fake accounts was 15%[0]. This isn't a new allegation. 0: https://www.cnbc.com/2017/03/10/nearly-48-million-twitter-accounts-could-be-bots-says-study.html https://www.cnbc.com/2017/03/10/nearly-48-million-twitter-ac...
  - jcranmer 4y ago
    As explained many times by many people, the 5% is not the number of bots on Twitter. It is the false negative rate of Twitter's bot detection algorithms.
  - kergonath 4y ago
    From your source: > our estimates suggest that between 9% and 15% of active Twitter accounts are bots From Twitter: “roughly 5% of our monetizable daily users are bots”. Both can be true at the same time, and it does not mean that Twitter lied.
    - dahdum 4y ago
      Twitter's lawsuit mentions this, stating only they know who is monetizable. IIRC Musk's lawyers deliberately push the same false equivalency in their filing.
benj111 4y ago
The fact that musk tweeted that he was buying Twitter to fix the bot problem. So the fact that he's using his reason for buying to try and get out of buying seems... Insane.
phailhaus 4y ago
It's insane because Twitter has been very careful to explain that the 5% number is not some sort of "promise". > 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. They covered themselves very clearly, and Musk has no standing here. He knew this, and decided to waive his due diligence and buy anyways. [1] https://www.sec.gov/Archives/edgar/data/1418091/000141809120000199/twtrq320ex992.htm https://www.sec.gov/Archives/edgar/data/1418091/000141809120...
- 8ytecoder 4y ago
  He claimed to buy Twitter, specifically, to clean it up; to get rid of bots. That was his stated goal. "If our twitter bid succeeds, we will defeat the spam bots or die trying!" https://twitter.com/elonmusk/status/1517215066550116354 https://twitter.com/elonmusk/status/1517215066550116354
  - kennxfl 4y ago
    Apparently Twitter subpoenaed Musk's friends and colleagues who were actively tweeting about the deal with what is believed to be an attempt to prove he encouraged his posse tweet negatively to force a lower price.
    - threeseed 4y ago
      David Sachs, prominent VC was one of those subpoenaed and he definitely seemed a little sensitive about it: https://twitter.com/DavidSacks/status/1554258141876932608 https://twitter.com/DavidSacks/status/1554258141876932608
      - SilverBirch 4y ago
        [flagged]
daed 4y ago
One point not mentioned (and I’m just paraphrasing Levine from Money Stuff here): It’s crazy because it would probably be BETTER if you had more bots. Then you could say that your revenue per user was higher and you could argue that you had more room for growth. So, if anything, lying and OVERestimating the bot count would help your valuation more.
- Ferret7446 4y ago
  Not really, because the revenue comes from ads not users. Twitter makes profit from ad buyers thinking they are reaching many users. The "revenue per user was higher" you mention is actually "cost per ad impression" and ad buyers want that to be low.
  - Sebb767 4y ago
    Ad buyers want this to be lower, but investors would love for this to be higher. I think that's what the parent was aiming at.
fooey 4y ago
There's a whole assumption that bots are a net negative to the platforms value besides any arguments over how many of them there are. As a human, it's annoying to get get a reply notification only to discover it was bot spam, but from the platform perspective that bot just created user activity and content for you for free. I have a theory that the most embarrassing thing to come out of this might be that Twitter doesn't really care about bots much more than issuing platitudes that they care about bots to assuage the user base.
- blackoil 4y ago
  If there are too many bot activities, user may completely turn off notifications and reduce the usage.
- ryantgtg 4y ago
  I have like 9 twitter bots and they’re all cool and interesting. I wonder if Musk’s tool differentiates between cool and uncool bots. In the past I tried to write bots that do things like reply to people, but that is a violation of the TOS and twitter would immediately identify and ban the account.
  - fooey 4y ago
    The tool he used to identify bots identified his own account as a bot, so I'm gonna go out on a limb and guess it's not very intelligent (or is hyper-intelligent)
    - hef19898 4y ago
      At that level of intelligence I bet it can drive a car.
deleted 4y ago
[deleted]

Sebb767 4y ago

> arguing that Twitter lied about its numbers for years specifically so that someone would buy it at an inflated price? On one hand, venture-funded hockeystick-startups like Twitter definitely aim for a quick exit to make cash, so it's not totally out of the blue. On the other hand, Twitter is publicly traded and therefore already had its exit.

mywittyname 4y ago
And the Twitter board was also very much publicly saying, "don't buy us."
- Sebb767 4y ago
  Clearly reverse psychology, confirming that this was indeed their play all along!
  - meepmorp 4y ago
    You joke, but expect to see this very idea put forward in all seriousness as this whole thing plays out. Likely by Musk fans, etc., but still.
    - Sebb767 4y ago
      I'm very much looking forward to my "I called it!" moment :-)
nerdawson 4y ago
There will be members of staff who’s job depends on the value of the stock and countless more with total comp tied to it.

nerdawson 4y ago

Wouldn’t the first count apply to anyone interested in buying shares in Twitter? Artificially inflating the mDAU figure makes the investment appear more attractive and valuable than it really is.

piker 4y ago
Seems like this is the correct answer. Musk is just putting himself in that class.

zinekeller 4y ago

> Twitter committed fraud by lying to the SEC about the mDAU numbers with the intent of inducing Musk to buy Twitter at an inflated price. What is that commonly-used aphorism? "One man's trash is another man's treasure"? Like, even if this is true, Musk didn't do (and subsequently waived) due diligence. > No, really, this is the allegation No further comment on it. > Count 2 is that Twitter committed [Texas fraud statute] by lying when it offered its shares. It's shotgun-pled, so I don't know which specific statements are supposed to be wrong, but I'm imagining it's basically the previous count recast under a different statute. If it's due to Texas laws, is the appropriate jurisdiction is the Texas courts or... oh, he's trying to claim that the case should be heard in a federal court (for diversity reasons). Good luck though Musk. > Count 3 says that Twitter broke the contract by failing to provide information. What information? The contract is already in the public, but okay you want to waste court time. > Count 4 says that Twitter broke the contract by instituting a hiring freeze. Twitter could just point to its peers like Google, Meta and Microsoft. > Count 5 is pretty please declare that Twitter lying about mDAUs is a materially adverse event that is cause to break the contract. Yeah, at this point I'm convinced that Musk wants to just waste everyone's time, especially after the chancery court denied his petition to schedule the hearing next year.

Sebb767 4y ago
> What information? The contract is already in the public, but okay you want to waste court time. The contract stated that Twitter had to provide Musk with internal data as required to close the deal. His teams tokens were apparently rate-limited at some point and it took a while for Twitter to give him access to all data, a.k.a. 'the firehose'. Just for completeness sake, Twitter seemed to still try (the token thing was probably a technical error) and whether giving him access to the firehose was actually necessary could even be contested, as he arguably wanted to use the data to not close the deal.
- zinekeller 4y ago
  Quite derailing a bit, but Twitter executives are also saying that it tries to protect Twitter since that Musk indicated that he will launch a rival platform. Honestly this particular part sounds like Stac v. Microsoft (https://en.wikipedia.org/wiki/Stac_v._Microsoft https://en.wikipedia.org/wiki/Stac_v._Microsoft)

mayank 4y ago

> I still can't get over the banana-pants insanity of the first count... arguing that Twitter lied about its numbers for years specifically so that someone would buy it at an inflated price? Not a lawyer, so could you explain why this is banana-pants insanity? There's malicious fraud (unlikely) and then there's the more likely case of under-investing in bot-detection and expunging efforts, e.g. "in favor of other priorities", to keep DAUs and subsequently valuations high for a potential sale.

Invictus0 4y ago
Twitter's methodology for checking bot accounts is clear, consistent, and has been detailing in its SEC filings for years. Anyone that cared could have easily double checked them. Recalling from memory, all they did is take a random sampling of accounts and have a human rate the accounts as a bot or not--back when Twitter had an API it would have been even easier to do this.
- jsnell 4y ago
  No. Nobody outside of Twitter can repeat the analysis. First, only Twitter knows which users are active (the population being analyzed are the DAUs). People doing bot analysis from publicly available define activity based on the account tweeting, which will probably skew heavily toward spam bots. Second, the mDAU metric is the DAUs with known bots having been removed. Nobody outside of Twitter knows which active accounts were excluded by Twitter from the metric. Even if 50% of Twitter DAUs are bots, as long as Twitter detects 90% of them as bots and marks them as non-monetized, the 5% number stands. Third, nobody outside of Twitter can actually do a proper job of evaluating whether an account is a bot, since they have orders of magnitude more signals than a simple tweet stream / public profile information. Twitters methology is far better than any publicly available bot detection would be, but the flipside is that it's not a replicable methodology.
  - kergonath 4y ago
    They must have some internal documentation though, and the process can be looked at during the trial, right? So it cannot be replicated by third parties, and Musk does not know what he’s talking about (shocker!), but it can be verified a posteriori. And I assume it will be at some point.

mywittyname 4y ago

This provides a lot of insight into how that man got to the top. He clearly has no qualms about lying and bullshitting his way into and out of anything and no amount of proof to the contrary will ever get him to admit he was wrong. I guess this is similar to the "reality distortion field" people claim Jobs had. Except the examples given there were more of him not believing people who said something couldn't be done.

kergonath 4y ago
Jobs’ RDF was a manifestation of his charisma: he could make people think something really hard was actually easy (when dealing with engineers and designers) or the other way around (when dealing with customers). Jobs did bullshit, but AFAIK more on the design and marketing side than on the business side (give or take the backdated stock option thing and his first stint at Apple, when he wasn’t in control). Certainly nothing like Musk’s shenanigans.
- cma 4y ago
  > (give or take the backdated stock option thing and his first stint at Apple, when he wasn’t in control). Certainly nothing like Musk’s shenanigans. Don't forget Jobs' prime role in having companies collude together to depress wages by not recruiting each other's employees: https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L... "an interconnected web of express agreements, each with the active involvement and participation of a company under the control of Steve Jobs...and/or a company that shared at least one member of Apple's board of directors."
  - kergonath 4y ago
    > Don't forget Jobs' prime role in having companies collude together to depress wages by not recruiting each other's employees Yes, indeed! I forgot to mention that.
benj111 4y ago
I reach the opposite conclusion. He offers to buy twitter on a whim, then changes his mind after signing a contract. That doesn't really seem like a good way of getting to the top.

linuxftw 4y ago

kergonath 4y ago
Hmm tough question… Maybe because they are not the same company, are not managed by the same people, and do not have the same business model? Just a guess…

Invictus0 4y ago

What's so interesting about it? It's total nonsense dressed up in legalese.

codingdave 4y ago

I don't honestly believe either side cares about the merits of the legal case - this is all just a very public and showy exercise to negotiate on a new price during a settlement.

koheripbal 4y ago
That's the nature of almost all civil cases - they are pretexts for negotiations. BUT, accusing Twitter of actual federal and state crimes is going to raise the awareness of several regulatory bodies, so this is going to get hairy.
- _djo_ 4y ago
  No it won’t, because those are baseless allegations thrown out in order to add more noise and confusion. You might get some red state DA eager for some publicity to make a song and dance about it for a bit, but that’s it. If Musk’s team could produce actual data and evidence of criminal law breaches they’d be reporting them to authorities not adding them as minor points in a civil suit filing in Delaware.
dahdum 4y ago
Twitter has the facts and the law on their side, so they most certainly care about the merits.
- meepmorp 4y ago
  When the facts are on your side, pound the facts. When the law is on your side, pound the law. When neither is on you side, pound the table.
nemothekid 4y ago
>I don't honestly believe either side cares about the merits of the legal case TWTR is only down 1.6% YTD. * SNAP is down 80% * PINS is down 40% * FB is down 50% A good chunk of TWTR's current valuation is now being propped up by Elon's buyout offer. Elon could be looking at paying a 100-125% premium on what should be the fair market value for Twitter. Twitter's board should care deeply about getting as much value here as possible.

leobg 4y ago

> arguing that Twitter lied about its numbers for years specifically so that someone would buy it at an inflated price? I don’t think that’s the argument. Twitter is an ad supported business. As such, the incentive is to count the “monthly active users” rather higher than lower. Specifically, there us no incentive to make an effort to exclude automated accounts from that number at all.

gfodor 4y ago

The point to me seems to be to set up things where this won’t go to court: if the primary claim is that Twitter misstated mDAU, the downside risk to Twitter is far greater than to Musk (I think) to have that fact finding occur. If it turns out the court agrees with Musk, then in one swoop the deal falls through, Musk is vindicated, the reputation of Twitter’s entire executive leadership and board is permanently damaged, and the market will punish the hell out of the stock due to the first and higher order impact of this on their valuation. The choice for Twitter boils down to what level of price cut are they willing to make to remove that possibility.

_djo_ 4y ago
Twitter seems pretty confident about revealing their process to calculate that figure: They’ve described it multiple times and been explicit in their SEC filings. As they should have been, as it’s a sound enough process given constraints and doesn’t need to be 100% accurate. They have nothing to worry about.
- gfodor 4y ago
  I've been downvoted but what you state is exactly right: they have to decide exactly how confident they are in their own process holding up in court (which isn't exactly the same thing as it being accurate) - and to whatever degree they are not confident, back it out to a price change to de-risk the outcome I mentioned. I agree with you that they seem confident, but the entire back and forth around mDAU originated with Musk and my belief is that choice of dispute was taken in the interest of setting things up so they won't actually go to court. The gambit of course may fail and it may go to court.
  - _djo_ 4y ago
    They’re going to court, because Twitter holds all the cards here and have the strongest legal case, so it’s in their best interests to have this adjudicated by a Delaware court. Musk is trying to pretend the mDAU = number of active bots. It’s dishonest, and likely designed to hurt the company and tank its share price and therefore bully it into conceding. Given the strength of their case I don’t see that happening.

lefrenchy 4y ago

> Twitter committed fraud by lying to the SEC about the mDAU numbers with the intent of inducing Musk to buy Twitter at an inflated price. LOL, their SEC filings basically say “these are our numbers but they’re highly subjective and could be way off”. Musk is either a liar or an idiot.

foobiekr 4y ago
Both.

dawnerd 4y ago

And keep in mind: Twitter wasn’t out there soliciting a sale. Elon came along and pretty much demanded he own it. Twitter tried to stop but he persisted. Should be a pretty clear cut case imo