Twitter Sues Elon Musk
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I see Musk walking paying nothing, or else a settlement with twitter at a lower price.
I've read the entire complaint, and this is my take as well. Twitter bent over backwards to comply with these requests even if they were invalid.
Twitter played this brilliantly. They kept complying and playing along even with the most obvious nonsense, letting Musk run his impulsive and overconfident mouth.
The number of times he legally shot himself in the foot is just staggering. There's documentation of everything, because he happily provided it. Musk's lawyers and bankers must have been dying a thousand deaths reading his tweets and other public remarks.
If Musk was buying a house (Twitter) we're basically at the point where He's made an offer, they accepted, Musk fulfilled all contingencies (including financial), they both signed the papers transferring ownership, and then Musk decided rather than moving in and wiring them the money he'd rather not. (Analogy doesn't work so well). Sure, if you own a house you can call anybody to come inspect it but you still need to wire the seller the money.
Any analogy breaks down. I thought this was a good one because in the current housing market many buyers have to waive inspections as a contingency because of bidding wars, etc. They can still get the inspections done though (and should).
If twitter was a house he was buying, the analogy is he waived his right to a house inspection and highlighted that fact in numerous ways to attain either a more favorable price (since there won't be post-deal negotiation on anything he finds and decides to argue) or to make Twitter more likely to accept. Or a combination of both. And in addition to that, in your offer to buy the house you also made legally binding statements that "I have been able to inquire about anything I might be concerned with about the home, and have been given answers and opportunity to find my answers on those questions, and as a result I am fully satisfied with how that transpired".
The only possible way to then get a home inspection is that you also included a clause that the deal is contingent on a loan being used and its possible that the loan may require certain information or processes. Now, if as a side-effect of getting that loan, a home inspection is required and if that home inspection causes the _bank_ to back out of financing then that is now possibly a cause to break the contract. Even this isnt fully accurate in this case though. Because there were specific guarantees and public statements made around financing that 1) the financing is already lined up (i.e. not contingent on an inspection) and 2) even if that fell through Musk would have the available capital to close the deal.
Even if that was true (and none of Twitter’s legal claims require the bot data to prove), so what?
I bet if we had a HN discussion we would not have a definitive answer. Going to start an AskHN to see.
The question they need to answer is more along the lines of "Did Twitter purposefully mislead investors in their filings to the SEC to such a great extent that it greatly lowers the future potential profitability of Twitter?".
The answer to that is almost certainly going to be no.
No it doesn't. Twitter not handing over its bot data demonstrates...that Twitter is not handing over its bot data. Does Musk have actual _evidence_ that Twitter is inflating its value and lying to its shareholders? You do understand that "Twitter not handing over its bot data" isn't evidence.
Anyway if the question of handing over "the bot data" data is irrelevant to Twitter's claims, then it doesn't matter if it's handed over. The legitimacy of those claims would then be unaffected by the bot data itself.
Yes, I think you would be, and anyone who has given you money to spend on this act, should think so too .. Trust, but verify: This is a pretty basic business rule.
Twitter has a responsibility to demonstrate that the trust they expect in their own estimations of their own market value, is actually verifiable - and with an issue of humans/bots ratio, they should surely be willing to be as open and honest as possible about this issue.
Twitters core value, the basis of their own estimation of the value of their stock, is entirely derived from the actual # of human eyeballs they have attached to their systems.
If those eyeballs are really just blind sockets on the outside of a software-based bot, then Twitter is factually lying about how many humans it has in its system. This would be essential for any buyer to know beforehand, and I really am astonished at the efforts you are going to justify this omission on Twitters' part.
The bot to human ratio is a KEY factor to understand in correctly evaluating Twitters real value - how anyone can argue that Twitter don't have the responsibility to demonstrate the accuracy of their estimation of market value, especially in the HN environment, is beyond me.
Perhaps the Musk-hate rage is blinding you to the rationality of Musks' request. "Hey, you say you are worth this much because <blah>, please show me that <blah> is actually a truthful and accurate estimation .." - this is not at all an unreasonable request.
Twitter board executives DO have the responsibility of answering the claim that their user group is a certain percentage human.
The fact that they haven't done this easily and openly is telling, in and of itself - and I would wager that most making the claim that they don't have a responsibility of being honest about the number of users in their system, are in fact engaged themselves in deceit and dishonesty on the issue of "actual users" versus "pretend users". How else can you justify the non-response?
Twitter should be able to easily answer the question: bot to human ratio? It is fundamental to their core purpose as a business to know the answer to this question. The fact that they can't, and are instead engaging in an anti-Musk agitprop campaign, is very, very telling ...
That means that Twitter DOES NOT have the responsibility that you claim. Sure, you may think that according to a certain moral framework they do, but in the context of this deal, which is what the thread is about and what the people you are responding to are talking about, it is irrelevant.
I might add as well as a counter to your accusations of "Musk-hate rage", that perhaps it's you who's suffering from Twitter-hate rage with a dash of Musk-fanboyism, and that it's Elon who's twisting the truth for his own gain rather than Twitter. Could that not be the case?
Lastly, it's not a "non-response". Twitter has continuously provided Musk with the data he's asked for, he just keeps asking for more. Also, even if you ridicule the idea, some data is simply _not_ appropriate nor necessary to share before a sale. Otherwise you could find out any trade secret from anyone simply by making an offer and then reneging on it.
Yes, if you agreed to, for a slightly different but more relevant example, buy a social media company where there was some doubt about the degree to which it's claimed user base was actually bots for $44 billion dollars, of which you were personally on the hook for $33 billion in cash with the rest financed, you would be an idiot if you also agreed to waive due diligence as part of that agreement without first having satisfied yourself on the real user numbers.
But you having been an idiot and signed that agreement, the fact that the agreement required the social media company to provide you information reasonably necessary to help you complete the acquisition would not give you a right to data who's only purpose would be to allow you to perform the due diligence you had waived.
As much as the bot data may arguably be relevant to the due diligence any sane investor would perform before such an acquisition—an argument you do a valiant job of presenting—it is not something that there is any reasonable argument that Twitter has an obligation to provide in this case, because Musk was so desperate to get Twitter to sign that he agreed to waive due diligence.
The problem is that the person who made the unprompted offer of $54.20 per share - thus estimating the market value at $44bn - spent weeks going on about how they thought Twitter's bot estimates were too low and that they were buying Twitter to fix this bot problem.
To then turn around and go "wah wah too many bots" is somewhat disingenuous, no?
(Also, Twitter have been using the same methods of bot estimation since 2013, afaik, and have submitted these numbers to the SEC every year. If they were plausibly wrong, someone would have flagged it before now, right? Because that would be submitting false data to the SEC and, I believe, they consider that A Bad Thing.)
You talk about "Musk-hate" but your post says you think he's an idiot.
Probably. Did Musk sign an agreement explicitly waving his right to see the receipts? Yes.
Of course Musk is free to counter-sue I guess and make the bots the point of contention.
Another avenue for him might be if the banks pull their funding, then the deal falls through and he may just have to eat the $1bn penalty (but that can’t have been initiated or influenced by him).
He made an impulsive decision, the market went down making him regret it, and since then he’s been trying to squirm out of the deal he signed by grasping at straws and in the process hurting the company he promised to buy. He’s in trouble, and some potential minor discrepancy in how Twitter has represented their users will not absolve him of it.
Would you be happy investing in a company that lies about its sales figures and doesn't provide the statistics and real evidence to back up their claims?
This irrational Musk-hate is occluding rational thought.
Well, no, if you had doubts about that going in (which Musk publicly did) but then agreed to a contract waiving due diligence (which Musk did), it would not justify backing out of the deal that you...suspected they might be lying and we're not provided sufficient information to assuage your concerns. There might be an argument that you stumbling into clear proof of deception that you didn't have before signing the agreement would justify that, but Musk has never claimed such a discovery, but there is no reasonable argument I can see that Twitter was obligated to satisfy Musk’s concerns here, when he explicitly waived the usual requirement in acquisition deals that would be the basis of such an obligation.
> Would you be happy investing in a company that lies about its sales figures and doesn't provide the statistics and real evidence to back up their claims?
No, and, more to the point, I wouldn't be happy buying a social media company where I was uncertain about the basis for it's claims of real users. But then, that's why I wouldn't agree to buy such a company—especially where I had doubts about those claims going in—and waive due diligence as part of the deal. That would be idiotic.
Not according to law and precedent, which is what I’m telling you. Whether Elon can be allowed to renege on this deal does not hinge on whether you personally think Twitter has been telling falsehoods. Show concrete evidence of the very substantial discrepancy in Twitter’s value that would be based on these lies (again, it would have to be on the order of 20-40%), and I’ll concede that he might have a chance to win on that merit. The bar is that high, whether you like it or not.
If there was some surprising element to musks bot assertions, it would be big news. In fact, there is nothing to see, and this is partly borne out by the lack of buy and sell side analysts collectively smacking their foreheads after realizing they has been completely wrong about Twitter the last 10 years.
You missed out the most important group: advertisers.
If Twitter has been wilfully lying for years about their metrics there would be thousands of lawsuits popping up from advertisers of all sizes. It would be the death of the company by paper cut.
There is no evidence of any bot problem let alone a massive one.
Even if there was, Musk publicly claimed he would fix it.
Musk stated that twitter has lots of bots and that is why he was not buying twitter.
Those views are simply ignorant; there are plenty of cases of the Delaware Court of Chancery ordering specific performance on merger deals. It is nothing even loosely similar to “quite impossible”.
No, he didn't. If he did, the company wouldn't be suing him, since he would control it.
I really wish he could just come out and say "sorry guys, I haven't slept in 6 years", coma the fuck out and come back as a sanish man.
On the other hand if musk keeps doing loony shit like this we now have Howard Hughes v2.0.
One more rocket-boom and SpaceX and Elon's pocketbook were done for.
Here's a few very consequential decisions that were taken under Musk: liquid methane instead of liquid hydrogen, same engines for first and second stage, full cycle combustion engine, usage of steel for Starship, and of course, reusable rockets. None of these decisions were close to being obvious. When you have hundreds of very passionate and talented engineers working for you, you'll be bombarded with lots of options. If you don't become a mini-expert yourself, you will start delegating lots of decisions, and the final result may or may not be optimal. Just look at Boeing.
I'm assuming you're talking about Boeing's screw-ups with 737 MAX. If so, you've got it backwards. The 737 MAX's design issues were precisely because the leadership (i.e., non-engineering management) wouldn't delegate to the authority of the experts (i.e., the engineers) and forced their own decisions on the project. They did not become "mini-experts" themselves, sure, since they didn't actually put in the effort to understand what the consequences would be, but they did treat themselves as "mini-experts", as evidenced by their "we know better than the engineers" attitude to the concerns that were raised by engineering during the development of the MAX.
And yes, most firms are command economies, after all. As CEO...
I'm sure he had enough money set aside even then from PayPal/x.com that even if SpaceX had gone belly up he could have bought a very nice house somewhere and lived in a very comfortable lifestyle for the rest of a human lifespan just living off the interest from $15-20 million.
https://youtu.be/AeeeEDSekG8?t=3663
[EDIT: in this interview he talks about the fact he had “no money” and had to borrow money for rent around that time]
The timing of his announcement was suspicious: https://m.youtube.com/watch?v=CH55WpJxF1s
And he’s gotten some flak from a high profile Republican as well: https://m.youtube.com/watch?v=7kT_80NaS6A
April: -5 Net favorability amongst Democrats
June: -37 Net favorability amongst Democrats
https://morningconsult.com/2022/06/23/elon-musk-favorability...
April to June:
59% more Democrats find Musk unfavorable
61% more Republicans find Musk unfavorable
But why is this even an argument? Is anyone still unaware that a lot of Democrats hate Republicans?
So why would being a Republican cause both parties to dislike him at the same percentage?
That's not true at all. The percentage of Democrats who dislike him is much higher.
The number of Democrats who started disliking him during the Twitter acquisition is much higher.
And the percentage of Democrats who started disliking him during the Twitter acquisition (as a percentage of the party) is also much higher.
As GP said, percentage growth in the percent who dislike him in each party is not a useful thing to compare. Doubling a side business from $100/month to $200/month is not comparable to doubling from $1M/month to $2M/month.
>But now he's made the cardinal sin of being a Republican.
That's easy to answer: hostile media coverage and negativity on social media.
What do you think is driving the change from April to June if not his Twitter acquisition and identifying as a Republican?
https://morningconsult.com/2022/06/23/elon-musk-favorability...
What else happened between April and June to make his unfavorable rating go from 37% to 59% among Democrats?
https://youtube.com/playlist?list=PL-eVf9RWeoWEfSK9mjKe4E67I...
He may not be a genius, may not even be a nice person at all, but surely you're not fooling yourself that other billionaires and CEOs who let their PR firms manage their image are what they appear either.
i thought this whole twitter deal thing was a way to expose how twitter is full of government ran bots? atleast in my eyes his reputation hasnt changed at all.
Seeing the headlines and social blade stats mentioned in [1] reminded me of veritasium video about facebook fraud (bots).[2] This video demonstrates just how easy it was to buy fake likes on facebook. Doing some basic research shows that buying twitter followers is pretty cheap. After doing some basic analytics the creator finds where the bot accounts are very likely from. Looking at the same engagement statistics of political figures shows some pretty interesting results.
But then things get interesting when you take Dead Internet Theory into account.[3] Elon has made it pretty clear that he views AI as a possible existential threat to humanity and if the majority of the internet is indeed fake accounts managed by a minority manipulating the masses something ought to be done and nobody is talking about it. Elon seem to be trying to fix humanities sense making apparatus.
1. https://www.thestar.com.my/tech/tech-news/2022/04/27/progres...
Remarkable that this is what you are taking away from this fiasco.
I've been pretty vocal about thinking Musk's case was flimsy at best on this. After reading through this filing [1], I have to say its even worse. A couple additions to the argument that has occurred on this site and elsewhere:
1. On page 15, Twitter highlights some pretty key clauses in the initial agreement that I didn't see picked up on previously around Material Adverse Effect (MAE) and explicit conditions that _cant_ be counted for it. Specifically they explain how even recession style market changes wont be considered MAE, and scope what might be considered MAE in their SEC filing to very specific statements that dont appear to include the bot number disclosures.
2. They give some behind-the-scenes recounting of specific clauses that were added/removed which make the entire thing much more tenuous in court for Musk. For example Page 12 Paragraph 34 ("Twitter also negotiated for itself a right to hire and fire employees at all levels, including executives, without having to seek Musk’s consent."), Page 12 Paragraph 35 ("Twitter further negotiated to narrow the circumstances under which defendants could escape the deal by claiming a 'Company Material Adverse Effect.'"), Page 12 Paragraph 36 ("Twitter negotiated for itself a robust right to demand specific performance of the agreement’s terms that encompassed the right to compel defendants to close the deal, and ensured that Musk personally was bound by that provision (among others).")
3. On Page 31, they claim they told him they sample 9000 accounts when doing their analysis and Musk then publicly tweeted they sample 100 accounts. If this is true, thats pretty damning for Musk when a court decides if hes just on a fishing expedition.
So yeah... I'm admittedly biased and obviously this is one sides language in the filing but.... I don't see a ton of support for Musks case so far.
[1] - https://s3.documentcloud.org/documents/22084456/final-verifi...
If the CEO is so mentally unstable that he will randomly buy billion dollar companies then he has no business running those companies.
But it is not, and Musk has a weird cult of personality around him.
> "Twitter is saying bipolar disorder isn't an excuse for my behavior. Twitter hates bipolar people and those with disabilities."
Even if you have a very small chance of winning, taking your chances with a court might have a positive expected value since billions of dollars are at stake.
Let’s also not forget the core of the matter: this is a class issue through and through. One of the most wealthy and powerful people on earth — propelled by government subsidies and contracts for his companies Tesla, SpaceX, etc. — is only able to do what he’s doing, and flaunt his contempt only because he is rich and powerful. Very few people would be able to do what he’s done and run away with it: calling somebody a pedophile with no cause, essentially claiming victory over his battle with an ineffectual SEC over his misbehavior, getting into a contract with Twitter with a populist energy and dominant conservative support only to (no surprise) cancel it last second etc.
This is an issue of wealthy people evading the rules everyone else has to play by under threat of violence (lawsuits, prison, etc.)
The amount of effort his cultists put to defending him and arguing that this is some brilliant play is beyond ridiculous.
It's a nice read. On the surface it looks like Musk is toast.
Twitter has been fudging for years.
Elon being disingenuous about the entire deal.
Twitter is arguing in their case “even though we had no reason to, we were still providing your team with everything and all data” while at the same time definitely not doing that.
They flat out admit to refusing to share how the sampling was calculated for their mDAU number for the past 5 years.
They say “it’s a super secret sauce to our success and Elon said he would start his own Twitter if this deal doesn’t happen and that is why we won’t share it but can share the entirety of Twitter data instead.”
Oof. Chop heads at Twitter and fire the lawyers.
Don’t have to be a rocket scientist to read between those lines…
Just feel bad for the normal every single day employees. If you’re not jumping ship, you are going down whichever way this lawsuit/deal closes.
Their filling shows that they absolutely did do that. Every time it was requested of them.
>They flat out admit to refusing to share how the sampling was calculated for their mDAU number for the past 5 years.
They provided several meetings, invitations to meetings, and outright extended breakdowns of exactly how it all works. Musk, for whatever reason, admitted to not even reading any of the information. That's a smoking gun towards the invalidity of his claims, especially about Twitter's cooperation.
They were answering all of his requests this whole time, and just letting him run his mouth and lie unopposed on Twitter about them cooperating.
I suspect Bob Swan will have a lot to say about the situation if he gets roped in as a witness, and it does not seem like it will be good for Musk.
(note this is the last sentence of a footnote buried away in their argument)
On the surface they're all growly and aggressive, but between the lines they're dancing all around the questions of mdau and bots. Whole lot of misdirection going on.
I have no idea how this will turn out, but I believe their numbers are a lot shakier than I did before I read the filing.
So yes, please let me know which lines exactly.
For your own "between the lines" reading start at 90. Remember this is Twitter legal making their case. Fair to say that is probably a slanted/biased write up of the timeline until we can see a defendant response. This is probably interpreted different by everyone (especially with love/hate Elon blinders on) hence the "between the lines" commentary.
However, here is the main funny and a tiny footnote I found hidden away -- which makes sense given this is their case/argument against him, so they probably don't want to draw too much attention to this in the big fun copy:
> Although Twitter has provided certain summary data regarding the mDAU calculations, Twitter has not provided the complete daily measures as requested.
If they are willing to share anything/everything, seems like this one would be very easy to pass along, no?
> This information is derivative of the information Mr. Musk first sought in Sections 1.01-1.03 of the May 19 diligence request list. Although Twitter has provided certain summary data regarding the mDAU calculations, Twitter has not provided the complete daily measures as requested.
In other words, they sent the monthly rollup and he wants the daily breakdown. They further argue all throughout that they feel that the data requested would not even service the stated purpose, and they want to exercise their discretion to withhold in certain ways. In addition to them explicitly saying "we still believe hes acting in an adversarial role so we are trying to close the deal but are still aware he might end up trying to start a competing product instead".
Obviously theres two sides to it, but when you sit down and read the public statements Twitter makes an _extremely_ convincing argument up-to-and-including screenshotting Musks own public tweets about the whole affair. In comparison, Musks SEC statements I would classify as "throwing shit against a wall and seeing what sticks" with very little explicit justification on why legally he is correct. The entire evidence presented by him is
> 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%.
i.e. we arent at all going to outline anything higher than 5%, just that its "wildly" higher and we are basing this on Musks "strong belief based on preliminary analysis".
Evidence for this. Advertisers wouldn't be too pleased obviously.
Here’s a report of a Court of Chancery case from 2019, for example: https://www.lexology.com/library/detail.aspx?g=a116d0d4-2ca0...
Can the Court of Chancery put him in jail, does it automatically fall back to the $1 billion, something else?
Based on his analysis, it does seem like Musk really has succeeded in shooting himself in the foot. There was a recent decision, again covered by Matt Levine, in the Delaware Chancery, where (from what I can understand), in a similar situation, the Chancery compelled the buyer to complete the purchase, notwithstanding their attempts to exit the agreement [3].
[1] https://www.bloomberg.com/opinion/articles/2022-07-09/elon-s...
[2] https://www.bloomberg.com/opinion/articles/2022-07-11/the-pr...
[3] https://www.bloomberg.com/opinion/articles/2022-07-12/i-was-...
https://www.bloomberg.com/news/articles/2022-07-13/twitter-s...
It's going to be pretty hard for a court to enforce getting financing, and getting the merger through.
As far as I understand it this is possible. It could actually destroy the faith in the delaware courts if this happens. So Musk in a way has everyone over a barrel potentially, and everyone has something to lose.
It would be a very interesting test of the US state machinery, which maintains there are no all-powerful oligarchs.
Is he kept in prison until he sells $44bn worth of tesla shares and pays cash for the deal?
It's a pretty interesting thought experiment.
But then he's got expensive lawyers and so on, to me this is the interesting side of the thought experiment.
This wouldn't be hard. It's not like Musk is sitting on a big pile of dollar bills that he can keep the court from grabbing. All of Musk's assets are at banks, and banks are very happy to follow a court order.
I won't say I'm subscribing to this idea, but I do find it intriguing, and it does offer a rationale for what otherwise looks like it could be a fairly stupid set of decisions made by someone who at least sometimes hasn't appeared quite so dumb. By all means, pick it apart and tell me why you think it doesn't hold water...just throwing it out there as it's an interesting theory.
It seems to stem from the same instinct that often leads people down the path to conspiracy theories - that reality can't be this stupid.
If I've learned anything in my approaching 4 decades of time on earth, it's that reality can in fact be that stupid.
Why would Elon torch his reputation just to help some fund managers? Doing it for money doesn't make sense, since he could lose a lot of it here.
Also, a huge portion of institutional investments are index funds, which don't make strategic buy/sell decisions.
That said, torching his reputation...seems to be one of his hobbies. Between the whole SEC battle, the subsequent pumping up of DOGE, the getting high on Rogan's show, having children with names that can't be pronounced, and however many more anecdotes we can come up with, arguably doing weird inexplicable things that seem otherwise self destructive or at least incomprehensible IS his reputation at this point.
I really think that Musk will be very lucky to get away with just a billion dollars payment to twitter for breach of contract.
Oh, and one last thought, if anyone from twitter is reading this, you should definitely ban him.
"If you rip out a man's tongue, you did not proof him wrong. You just demonstrated to the world that you are afraid of what he might have said."
Twitter knew this with Trump - which is why they only kicked him out once he had become harmless. They know this with Musk, who most definitely is not.
pathetic, you have a block button, use that if he bothers you so much
Twitter settles and buys Musk's shares for $0 worth ~$2.6b at current price.
But it would stop Musk strategically dumping the stock and so could be worth much higher to Twitter.
If Twitter wins the suit, EM will be in exactly the place he bargained to be in when he signed the merger agreement: the proud new owner of Twitter.
It may well be that Twitter thinks that their case is strong but that the legal proceedings present risk and damage the company's ability to operate in the short term so it's more in their favour to cut a deal where they get some payout from Musk. The only really strong thing I think they'll need (other than cash) is that Musk agrees not to attempt to buy twitter again.
The reason I say that is because without the deal TWTR's fair market value is probably in the $20Bn region, and so almost any amount of money they can extract from Musk to walk away would allow him to come back and buy the company cheaper than the current deal - and that would just look absurd for twitter. Say for example they say "give us $10Bn to walk away" Musk could pay that, turn around and offer to buy the company again at $25Bn and probably succeed. So the only real way to protect themselves is to prevent him doing that.
I'm not sure this would really do anything for Twitter. The board isn't required to consider non-serious offers, and I can't imagine anyone taking a takeover offer from Elon seriously ever again, outside of friends and family deals.
Not to mention that Elon is now absolutely notorious for violating contracts that he has agreed to. What's to stop him from ignoring an agreement to not offer to by Twitter again?
That would require the board and shareholders to approve it.
Why would they when he's demonstrated an inability to be a safe pair of hands.
Usually it's failed hedge funds operating in the shadows that manage to lose this much in a rapid market downturn.
Elon getting away with walking off this deal unscathed financially is in no one’s best interested but Elon’s