Musk Says Twitter Must Prove Bot Claims for $44B Deal to Proceed
bloomberg.com
bloomberg.com
It feels like pure projection.
I have been following the story with curiosity because I think disruption at Twitter could be fascinating. The impact other than pretending to know what Musk is thinking has already been profound. I say this as someone without any skin in the fight.
Fascinating
With all sorts of projection and rambling and confidence. It's so weird.
1) The 9% was surprising because everyone believed Musk had not taken any steps, because he was legally required to publicly declare when he acquired 5%.
Which he did not do until much later, in order to lower his acquisition price, and is now under an SEC investigation for it.
2) I'm not sure who was predicting a hostile takeover. His suggested price was high enough that most commentators said it would be fiscally irresponsible of the board to turn down the offer. Which is why the board accepted the offer the moment Musk showed any signs of raising funds.
3) No one believed that he wouldn't be able to raise funds. It was pretty obvious he could. The question was whether he was interested in, considering he had taken no steps to raise the funds and it was fairly obvious that it would require him to sell/pledge Tesla shares hurting the TSLA stock price, and it wasn't clear he would want to do that.
Maybe you could recite some of Musks achievements or otherwise entertain us
A few years ago, Musk got emotional and publicly accused one of his critics of being a “pedo”. He doubled down on this lie when goaded on Twitter. And when he realized he had to have some kind of evidence, he in desperation paid $52,000 to a private investigator to dig up anything on his “pedo” critic. The PI turned out to be a scammer and convicted felon: https://www.buzzfeednews.com/article/ryanmac/elon-musk-hired...
There’s little reason to believe that Musk is a grand genius with plans too smart for the common mind to grasp, rather than just another all-too fallible human.
Who said this or insinuated it?
My only point is people who don't know the man, or his motivation, or what he wants to do are making arguments as if they do. Or putting words in peoples mouths. Or bringing up irrelevant facts that have nothing to do with the purchase of twitter.
Basically, legally Musk is already past this point -- he signed a contract promising to buy Twitter without doing any real investigation. I've felt for a while he's looking for ways to squirm back out, but he legally can't (unless he simply can't raise the funds at all, that's what the $1 billion "exit fee" you may have heard about is).
Of course it's possible Elon will simply ignore the law, as in practice the rich can often simply ignore laws they don't like with limited consequences.
The best leverage Twitter has is to threaten to take away his twitter account - hit him where it hurts.
True, but that is because nobody tries to go after his stupid moves. Even the SEC seems to have given up. Twitter can absolutely force him to honor the contract he signed; but it's true it's unlikely they will do it, but they may. Why write up a big contract like this if there was no intention to enforce it in the first place?
> The best leverage Twitter has is to threaten to take away his twitter account - hit him where it hurts.
Yes, that would be extremely funny, and a big relief for everyone.
Of course, everything can be negotiated. But should the other party not want to negotiate, they have the legal means to force him to buy.
Perhaps. But Musk is wrecking Twitter at almost no cost to himself. His lawyers will try proving that Twitter board lied to investors for years. So current management is a toast.
And no one would be willing to buy Twitter at current valuation. Except Bill Gates perhaps....
I don't know why people have such a moralistic view on contract law. What should the consequences be of breaking a contract? A fine is pretty normal and enforceable. Stop acting like its some kind of personal affront to your ethics that someone agrees to buy something, watch the market tank and rethink the price. Imagine you agreed to buy a house and the house gets set on fire, dropping the value by 30%? Wouldn't you try to renegotiate or get out of the contract? Now do that with billions of dollars.
Those contingencies are written into the offer. This is why you have a real estate agent, they know what they're doing. You don't need to illegally break the contract, because it'll already be in the contract.
He agreed to buy based on twitter public filings. Those might turn out to be a lie. Ask Mike Lynch how selling a company based on SEC filings filled with lies ends up.
https://www.cio.com/article/304397/the-hp-autonomy-lawsuit-t...
https://www.computerweekly.com/news/252512620/British-court-...
> Delaware courts have almost never found an MAE. An MAE has to be something that would “substantially threaten the overall earnings potential of the target in a durationally-significant manner,” the courts have said; there is a rule of thumb that an MAE requires a 40% decrease in long-term profitability. If it turned out that 6% or 20% or 50% of Twitter accounts are bots, that will be embarrassing and might even reduce Twitter’s future advertising revenue, but will it be an MAE? No.
https://www.bloomberg.com/opinion/articles/2022-05-13/elon-m...
Then there's the matter of the $1b "exit fee". And even if he wrangles out of that, I'm sure his financiers would have charged a pretty penny just to put the finances in place.
I can only assume that Twitter agreed to being acquired knowing full well that Musk will walk away with egg on his face.
Saying that then was the most logical, but even here it would get attacked and downvoted.. two weeks ago.
I am starting to think the bot fascination is more projection by Muskyrat like the pedo comments he made before.
Just looking at his Twitter feed, he was absolutely on fire in the week after the deal was announced; I can only imagine the rush he was feeling from such a large purchase.
Now that the rush is subsiding it would make sense that he’s paying more attention to his negative feelings around the financial risk and future workload he created for himself with the purchase.
Do you have any evidence to back this?
There are people both successful and unsuccessful who have these conditions, but I've never got the impression that they're a common trait of successful people.
You can offer to buy a house knowing full well there are going to be problems which will show up in the surveyor's report. You can then adjust your offer accordingly. This offer will likely reflect what you were willing to pay all along.
A low initial offer would be rejected since, at that point, the problems were not public knowledge. Now they are public knowledge, accepting a revised low offer may be the only option left?
I've mentioned this story elsewhere but it's still relevant...
Year's ago I had a few twitter accounts that I was holding purely for the handle/name. I never followed anyone or tweeted anything, they were dormant accounts and I rarely logged in.
After a couple of years these accounts were following random celebrities, rock bands and public figures. It seemed obvious at the time that twitter were using dormant accounts to bolster follower numbers and I expect this has been happening on a huge scale for years.
So, bots aside, twitter's numbers are the stuff of dreams and fairy tales.
I read someone calling Musk the idiot and confidently stating twitter would run their bot checks against the entire userbase because they're competent. Then Musk tweeted their internal check is literally from a sample size of 100. Next twitter called him to say he violated NDA by publicly disclosing that fact.
Twitter does not come off as an honest company. They don't use a standard measurement for DAU, they admitted to inflating the numbers on top of that, and now we know their bot check for what, 100MM+ accounts was from n=100?? I honestly hope he tanks their stock price when he backs out and buys them for $10b or something.
Literally every single news outlet -- just search online for "musk twitter due diligence"
Some selected sources:
- https://www.bloomberg.com/news/articles/2022-04-26/twitter-t...
- https://www.ft.com/content/f60b6385-eef6-461e-9fcc-b3cb999a7...
- https://www.reuters.com/technology/musk-says-44-billion-twit...
- https://news.sky.com/story/elon-musks-pause-on-twitter-takeo...
I don't care if every news outlet is saying it, where is the source of this? Sadaam also had WMD's according to every news outlet. I know Musk moves quick and frantically sometimes, but it's hard to believe he waived DD. And if he did, why would he be doing any DD now?
Given that the deal has been agreed upon and the requisite SEC filings are in place, it's reasonable to assume that either the due diligence was fully completed by rockstar 10x financiers in this ridiculously short period of time, or some extreme shortcuts were taken. I tend to lean towards the latter reasoning from some experience in this space, so it's not much of a leap for me to believe the news sources that I linked above, Saddam's non-existent WMDs notwithstanding.
> I don't care if every news outlet is saying it, where is the source of this?
Some quotes from the FT paywalled link:
>> As one person involved in the debt financing explained, the due diligence “was easy. There was none. Not in the classic sense.”
>> [Musk's] wealth eased concerns for many lenders, which accelerated due diligence processes at the behest of Morgan Stanley, Musk’s financial adviser and one of the biggest lenders on the deal.
> And if he did, why would he be doing any DD now?
My speculation is a combination of sticker shock and buyers' remorse.
I think you mean home inspector, not surveyor?
Problems:
1) The home inspection contingency has to be in the offer.
2) The buyer has to hire a professional, independent home inspector. You can't just send in anyone and make up stuff.
3) The seller has the opportunity to remedy any problems that arise in the inspection report. So in this case, by analogy, Twitter could do a mass purge of accounts under looser criteria than usual, taking out a bunch of spammers and likely a bunch of innocent accounts at the same time. Then the deal would still have to go through at the original price.
In home buying, I've never heard of anyone taking this strategy you're suggesting. It would be reckless and probably not work as you hoped. Once an offer is accepted by the seller, it's very hard to get out. If you suspect there are significant problems with the house that need repair, and the seller knows there are significant problems, it would be extremely extremely dumb to make a higher offer than you'd pay, hoping the home inspection will save you.
To make an analogy, it's like if I asked you why you're talking about home buying. ;-)
Haha, no, our system is likely worse.
Bloomberg's article points out that this sort of desperate copout is not possible under the merger deal that Elon Musk signed, and even if Twitter decided not to push for a legal dispute they are automatically entitled to a $1B payment from Elon Musk.
If he's seriously worried about bots _now_, he's stupid (or high?)
The other explanation is that there is a bigger scheme, maybe involving a reason to sell some Tesla stock. That's possible, but it seems a little too complex to be actually true.
I hate twitter but have an account I barely ever log into and have never tweeted anything. If you want bots to be lower then count me in the sample. If you want bots to be higher don't count me since I am not really active.
If you want bots to be lower then take the sample at 4am EST on a Tuesday of US users.
If you want bots to be higher take the sample right after a major news story breaks.
Instead of 5% you could say 10 million active bots a month to make the number sound higher too.
I can't find the exact wording right now, but I recall when I read their original statement from Twitter the number came with several caveats and conditions. Basically they didn't say that only 5% of accounts where bots, but that of accounts that fulfil criteria A, B, C and D, only 5% are bots.
edit: the full information is on page 5 of their Q-10 here [1].
[1] https://investor.twitterinc.com/financial-information/sec-fi...
> We define mDAU as people, organizations, or other accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com, Twitter applications that are able to show ads, or paid Twitter products, including subscriptions. Average mDAU for a period represents the number of mDAU on each day of such period divided by the number of days for such period
> We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our mDAU during the quarter
The filing by Twitter: https://investor.twitterinc.com/financial-information/sec-fi...
The relevant paragraph: "We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated."
Basically, I feel like there is no legal substance to Elon Musk's "excuse".
1. Sample random X accounts from known mDAU accounts
2. Use human analysis to manually review sampled accounts, using public and private data and metadata
3. Bucketize account accordingly
Twitter's process for finding bot accounts may be flawed, but if it's the process they use for their SEC filings, the deal is on.
I mean just all this stuff looks like what I would be doing if I thought, hah hah I am going to manipulate market because I can!
I really don't think he needs market manipulation at all. He has much easier, much faster and much safer ways to make orders of magnitude more money. I don't think going to prison is a part of his plan to go to Mars.
This hypothesis lacks any credibility given that, according to Bloomberg's article, "The [merger] contract gives Twitter the right to force [Elon Musk] to close, and put up the $27.5 billion of equity 1 that he has committed to the deal, as long as his debt financing is available."
No one in their right mind signs a contract binding them to pay up billions just to check how many active users does a social media service have.
Or are those partners as legally bound to providing him with the loans as he is to buying Twitter?
Again, that makes absolutely no sense at all. Elon Musk signed a contract that either forced him to execute te merger at the expense of tens of billions of dollars, or at best a no-questions-asked escape hatch at a price tag of a billion euros.
Does anyone remotely sane would ever risk losing that sort of cash just to peek at the number of active users of a social network?
Ridiculous.
b) And yet... given the reported clause that he is only on the hook for the 1B if he pulls out, but not if he loses his loans, then the only way I see to make the hypothetical even slightly feasible is if he knew he could get the financing to fall through in a way that he then wouldn't be on the hook for the $1B.
But yes I agree it's a highly unlikely motivation.
No, not really. The Bloomberg article goes into great lengths about the implications of a lower than expected number of active users accounts, and points out in no unclear terms that the claim does not even hold if that number is significantly large, mentioning even half the number of users.
I think Tesla is creeping closer to this limit, but whether that is the actual reason... I don't know.
[0] https://www.sec.gov/Archives/edgar/data/1418091/000110465922...
Musk is a straight forward person and has said on many occasions that he absolutely hates deception and strikes out at people that he thinks are deceiving him. Similarly he's not the type to lie either. He says what he thinks are the facts at the time he says them.