The Twitter-The Elon Musk saga continued this week, as the two sides traded barbs in legal filings ahead of a five-day trial set to begin on October 17.
Recently released legal documents by lawyers representing Musk in a countersuit against Twitter claim the social media company engaged in a scheme to “mislead investors” by providing false figures in financial documents filed with the Securities and Exchange Commission. Musk accuses Twitter’s platform of having at least double the number of bots the company claims in SEC filings and fewer “monetizable daily active users” than expected.
Twitter replied that the billionaire CEO of You’re here and SpaceX is making incorrect assumptions and looking for an excuse to pull out of its $44 billion OK in April to buy the social network.
Both sides are building their cases as the Delaware court date nears. solve the dispute over whether Musk should follow through on the deal.
The drama began in early April, when Musk revealed a large Twitter stake. After initially agreeing to join Twitter’s board, he backtracked and instead offered to buy the company or sell his holdings.
Twitter was initially opposed to the deal and sought another route, but eventually reached an agreement to sell to Musk for around $54.20 per share. But then, with the market plummeting and Twitter’s share price falling, Musk started bashing Twitter in public in a clear effort to get out of the deal.
Here is an overview of the latest developments based on new, and some previously confidential, documents filed with the court by both parties:
Figures “far from true”
In a legal filing, Musk accused Twitter of including statements in its SEC disclosures that “were far from true.” Through his business law firm Skadden-Arps, Musk said the social media company “miscounts the number of fake accounts and spam on its platform” to paint a rosy picture for investors. .
Musk has complained about scams, spam and bots on Twitter for years.
In a Press release Announcing his deal to buy Twitter, Musk wrote that “defeating spam bots” was one of his goals and motivations for taking over the company.
Twitter responded in a separate Delaware court filing this week that Musk and his team “spent months trying to invent a spam disclosure problem and found nothing.”
Ill-defined metrics
Musk’s attorneys also said in their countersuit that Twitter’s “monetizable daily active users,” or mDAUs, are “not as closely tied to revenue as Twitter leads the public to believe.” They allege that Twitter does not accurately explain to shareholders or Musk how they derive the key mDAU metric.
In response, Twitter said Musk never raised concerns about mDAU as a reason to terminate the deal.
Musk’s allegations of misleading mDAU statistics “are a newly invented litigation position,” the Twitter lawyers wrote. Additionally, Twitter said it “accurately discloses in its SEC filings” how it defines the mDAU metric and its importance to the company.
Dependency on deposits
Musk said in his countersuit that he relied on Twitter’s SEC filings for details about the social network’s business and challenges.
What Musk doesn’t say is that he’s been friends for years with former Twitter CEO Jack Dorsey. As CNBC reported in January 2020, the two leaders even exchanged ideas on how to improve Twitter.
Musk also has a long-standing business relationship with Silver Lake, a financial company run in part by Twitter board member Egon Durban. Silver Lake was a major and early backer of SolarCity, where Musk was chairman, and was reportedly one of the companies advising Musk when he said he was considering taking on Private Tesla for $420 per share, and had “secured financing” to do so.
Twitter reiterated in its filings that the “SEC disclosures are accurate” and that the company “has not misrepresented anything.” Twitter said Musk’s claims “are not supported by any facts”.
“Musk sought an urgent settlement, undertook no due diligence, and offered a self-proclaimed ‘seller-friendly’ merger agreement that contained no statements about fake or spam accounts or mDAUs,” Twitter’s attorneys wrote.
‘Effusion’
Musk said Twitter pushed back on his team, not passing on requested and necessary information about bots and spam on the platform. The complaint does not mention that Musk said he might create a competing social media platform.
Twitter’s attorneys alleged that “Musk invents representations that Twitter has never made and then tries to use, selectively, the extensive confidential data that Twitter provided to him to ward off a breach of those alleged representations.”
The attorneys said Musk “inconsistently asserts” that Twitter “violated the merger agreement by blocking his requests for information.”
Double the bots
Accusing Twitter of having at least twice as many bots on its platform as the company disclosed, Musk’s team relied on “accounts visible on the Firehose using the Twitter’s Botometer tool. ‘Indiana University,’ the counterclaim reads.
Twitter questioned Musk’s spam and bot analysis methods, in particular the use of the Botometer tool. The lawyers wrote that the tool “applies different standards than Twitter, which earlier this year named Musk himself as most likely a bot.”
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