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Comment by jcranmer | Hacker News Reader

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?

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> 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.

> 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.

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)

Twitter was contractually obliged to give him data to help him close the deal, not to help him find a way to squirrel out of the deal.

I suggest reading the twitter complaint. It is not long, and it is very well written. They discuss many (if no all) things musk has been saying trying to avoid the acquisition.

If I recall correctly, Twitter says they had no obligation to provide the firehose to Musk, but they did anyway. Musk had issues with rate limit, but twitter fixed it in reasonable time.

"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'."

Here's the thing though:

None of that data was required to close the deal. Musk had no diligence rights, he explicitly gave them up, and the contract clearly says so. He doesn't get to do regular diligence through that clause, it's meant to cover the literal things necessary to close the deal (like financing info or whatever).

So Twitter didn't have to provide anything here, and certainly not access to the firehose.

His response is going to be smacked down pretty hard by a chancellor - it's 100% nonsense.

IANAL, but I think it makesMore sense if you separate it into:

1. due diligence as a buyer (contract) to review additional information, ask questions etc

2. using public information to purchase as an investor (he was) for a public company regulated by SEC

I think the claim is not that he has the right to #1 (he didn’t) but that #2 was false and has been false.

No idea if contract laws let #2 get him off the hook though

All that matters, against musk, is that however twitter claimed to count it's users was infact, how they counted.

Musk wanted to invent some means to count users in an effort to demonstrate fraud. But that's not fraud. Just because musk provides an alternate means to count users, doesn't demonstrate fraud.

Full stop. Unless he proves that they didn't count the way they claim, he has not claim. Waiving he due diligence clause is what makes his claims a non issue.

I was not defending Musk, just trying to explain what he might be “thinking”.

I see you’re point though. I guess he’d have to prove they used a formula that they knew was wrong for it to be fraud?

> I guess he’d have to prove they used a formula that they knew was wrong for it to be fraud?

They could know the formula was wrong - inherently every measurement is wrong to some extent which is why you see a +/- error, that is not fraud.

For it to be fraud, they would need to measure it in the way they claim to, get a result they dont like, and report it as <5% anyway (with intent to defraud people). Which could happen in theory, but seems highly unlikely.

> Musk didn't do (and subsequently waived) due diligence.

Wasn't him collecting all of this MAU stuff to analyze it part of the due diligence needed in order to close the deal?

No. He signed the merger agreement without doing DD into mDAU, and didn’t write any contingencies around mDAU onto the contract.

You do your diligence BEFORE signing the merger agreement.

Exactly. This whole thing smacks of regret on an impulse buy. And as Musk should well know: regret is no cause for contract annulment. Twitter is going to be his Waterloo if he can't follow through on the deal, they're going to force him to perform which means he may have to sell a whole bunch more stock to people who know he has to buy. That isn't going to help at all.

O, that seems pretty odd. I can't think of any reason for them to do that beyond trying to get out of the deal or incredible negligence on the musk side in not doing that before hand. Were they able to get that data before hand if they wanted it?

It doesn’t really matter at this point, because he signed a binding agreement. He’s the one that made that move. Specifically why is just speculation now.

But, hey, we’re all here speculating anyway! My take is:

1) He’s a history of making impulsive decisions without thinking (or caring) about the consequences.

2) It forced Twitter’s hand because they couldn’t act like it was it a non-genuine offer.

3) He’s so rarely held accountable for the consequences of his decisions he knew it didn’t matter because he’s above the law.

You have to make a series of countless good or great decisions to be that successful. His ratio of good decisions to bad ones is probably one of the best in the world. He is not above the law, he has to stand before court as every normal citizen has.

Or, counter-point: https://twitter.com/nntaleb/status/1534172773580513280?s=20&...

If you think his ratio of good to bad business decisions is even average then you haven't been paying attention. Tesla has nearly gone bankrupt repeatedly, and it's stock price has largely risen the most after Musk was removed from controlling the company as a result of a series of tweets that were considered illegal attempts at manipulating the stock market. In point of fact, Musk still controls SpaceX and internal memos leaked earlier this year indicate that SpaceX could very well go Bankrupt within the next 18 months. The Boring Company is generally solvent and under Musk's full control, but it is far smaller, and could be in danger of law suits for effectively failing to meet contractual obligations regarding the tunnel the agreed to provide Las Vegas. The Boring Company's future doesn't look great to me, their results don't meet public expectations which could easily lead to funding drying up.

Also, anybody who thinks accusing a rescue diver of pedophilia purely because he told them not to interfere with rescue efforts is pretty far from being a genius. Musk has been lucky his whole life, people just rarely see his failures.

Basically, his press is full of shit. The claim that he learned to program and wrote a video game at age 10 is quite ridiculous. Seriously, there are online websites where you can play his "game". It's Space Invaders, except theirs only one alien, you can't have multiple projectiles on the screen at the same time, the alien doesn't fire at you unless they get extremely close, if the alien fires at you it locks your controls making it virtually impossible to dodge and prevents you from firing back, and when you successfully hit the alien it immediately respawns at a random location which may be in range of you, resulting in you immediately dying. My own nephew programmed significantly more impressive games at age 10, will people start following him and assume he's never made any mistakes if someone who owns an emerald mine gives him hundreds of millions of dollars to invest into new technologies and the businesses don't ultimately fail?

I’m not an Elon Musk fan but it was 1981 when he was 10. There were far fewer resources for learning to program and make games in 1981 than there are today. Not to take away from what your nephew did, but there are currently hundreds of “how to make a game” tutorials available online in a variety of instantly consumable formats. There are even entire development environments focused on simplifying game development with low code workflows. In 1981 there wasn't even the concept of a widely accessible public Internet.

Is your nephew close to Musk's age? Programming a simple game in 1980 is much more impressive to me than doing the same in the 2010s.

You are basically making a claim that he is a bad businessman without mentioning that he is one of the richest people in the world. Why should anyone take your arguments seriously?

He signed a binding acquisition agreement in a $44 billion dollar deal without doing any due diligence. Bigger deals have been struck on similar timeframes, but rarely has the purchaser evidenced such obvious buyer’s remorse so quickly afterward, or embarked on the venture with as little thought as he put toward it.

That’s a pretty weighty fact on the scale of “Musk - canny businessperson, or remarkable streak of being in the right place at the right time.”

So you suggest he is a bad businessman and his success is only attributable to luck. To understand how ridiculous this claim is you first need to realize that there are infinite ways to fail and very very little ways to succeed. Good and bad decisions are not symmetric, it is not 50:50, it is more like infinite:1. But even if it was 50:50, for the thought experiment sake, if you make random decisions you quickly make a bad one, and to be successful you need to make way, way more good decisions than bad ones. Sure luck is obviously always a factor, but thinking that he created a car that he later sent to space on his own rocket is not a sign of extraordinary competence, well, to me you can as well claim that the Earth is flat.

Yes, Musk could have received that data and had time to analyze it before buying, these kind of merger contract processes have time built into them to allow prospective buyers to look into finances and other information that is not normally publicly available. Musk was so certain he wanted this that he signed additional documents waiving his right to a due diligence period, allowing him to immediately sign the merger agreement.

This next bit is mainly speculation, but the reason Musk is actually trying to back out is partly to do with the fact that signing the merger contract caused his other companies stock prices to drop and public speculation that his existing business would suffer if he needed to focus on running Twitter. The second and more widely believed version of events is that partly due in fact to his other stock prices dropping, Musk cannot afford Twitter without having to sell more of Tesla and SpaceX than he is willing to. Musk is already down to owning only 17% of Tesla and less than 50% of SpaceX, although that's complicated as some percentage of Tesla is owned by SpaceX and vice versa along with the Boring company in such a way that Musk effectively has majority control over SpaceX whenever he wants. If he has to sell additional stock to cover the purchase of Twitter he would very likely lose the ability to control everything except possibly the Boring Company.

What's more, the contract he signed effectively puts him in a position of buying Twitter at a substantial loss as the stock market has significantly fallen since Musk signed the deal. He would effectively be losing significant control of his two primary sources of wealth in exchange for something he has likely since discovered he cannot run the way he wants.

In short, this was a bad move financially when Musk first announced his intentions, it was extremely foolish of him to waive due diligence, and it became financially even worse shortly after he signed the deal, partly due to the facts that people lost trust in him for waiving due diligence while making a financially inadvisable move, partly due to the fact that he's actually pretty bad at math and doesn't understand the stock market, and partly because the stock market took a nose dive right after he foolishly waived due diligence and signed such a financially ruinous deal.

If you're thinking Musk is smarter than I'm making him out to be, please consider that Musk tried to insert himself into a cave rescue he had nothing to do with, was told not to interfere with the professionals that know what they're doing, and retaliated to being told to butt out by publicly accusing the rescue team lead of being a pedophile despite knowing nothing about the man.

Trying to offer to help without really understanding the situation isn't necessarily a bad thing, but randomly accusing someone of being a pedophile because they were critical of you is so far beyond acceptable behavior it's amazing Musk wasn't banned from Twitter as a result (it was where he made the accusation publicly). That level of harassment violates Twitter's ToS, plain and simple.

Also I’m pretty sure Musk himself wrote on public Twitter that he would trim the fat once he owns the company ..

> 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.

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.

> 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.

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.

Another explanation could be, he’s not actually that good at running a business

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.

No, the burden is not on Musk to prove anything. He waived all rights to due diligence. There is nothing to prove or disprove.

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.

Well twitter would have been obscuring bots to obtain an inflated purchase price _by anyone_.

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-ac...

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.

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.

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.

Musks lawyers aren't fans of being disbarred or other legal sanctions, so they carefully couched the language in their filing to say "Musk believes [the intentionally confusing, possibly false narrative about bots]" without providing evidence, which is weak sauce.

5% of mDAU is a false negative rate.

5% of users is not a claim that Twitter made.

... "but that it was doing so specifically so that Musk would buy Twitter at an inflated price."

The insanity is people being perfectionistic in that it was specific intent to target him to buy it - even if it says "him" - it's absurd that people are taking that literally, and not simply to "make it seem valuable for someone to buy."

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.

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/1418091/000141809120...

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

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.

David Sachs, prominent VC was one of those subpoenaed and he definitely seemed a little sensitive about it:

https://twitter.com/DavidSacks/status/1554258141876932608

My heart bleeds for him. He’s achieved tremendous success in a remarkably successfully economy based on dynamism and the rule of law, and now he’s asked to do his part, under oath, to maintain that system. Doesn’t he know that part is for chimps?*

*Tried to write “chumps,” but liked the typo better.

The weird part is that "twitter has lots of spam bots" is a completely independent claim from "5% of the users who use our website or 1st party apps are bots".

Yep, which I'm sure Elon and his entire crew of bankers and lawyers understand quite well. Musk is lying and sowing confusion in order to mislead people.

While your comment is technically true standing alone, you've also slightly misunderstood what the 5% figure is about.

It's not "users who use our website or 1st party apps", it's "monetizable daily active users", which may be similar to the group of users you described, but most importantly Twitter can choose not to show any ads (or not to charge money for ads shown) to bot accounts.

So even if Twitter only had 1 single non-bot user, as long as that's the only user they are "monetizing" they would be at 0% of mDAUs being bots.

Therefore, as jcranmer commented elsewhere in this thread, the 5% is actually their estimate of their own false negative rate of detecting bots (i.e. deciding which accounts can be monetised vs not).

That's not what the original poster implied. He implied it's crazy because of the duration and specific purpose of the supposed lie.

Doesn't seem strange to me. If I am suing a company for false advertising I'll claim that their behavior was aimed at inducing me to purchase the product at an inflated price. Not because I think they were specifically conspiring to target those lies directly at me personally, but because I am the one that is a party to the lawsuit. If Twitter was lying to inflate the stock price in general, then they were inducing everyone to buy at an inflated price and Musk is one of those people.

Twitter added a loop hole saying that their data might be incorrect. It seems disingenuous to absolve them of all sins if their data is hugely incorrect to the point where it's fraudulent just because they added that loop hole.

> It seems disingenuous to absolve them of all sins if their data is hugely incorrect to the point where it's fraudulent just because they added that loop hole.

If there's an actual industry standard then you could argue that Twitter is lying. However as everyone in the legal community knows there are two important concepts here: wilfulness and negligence. Did Twitter willfully do this or is this just because there isn't an actual standard methodology but tried to do their best-effort anyways? Is Twitter aware of problems in its methodology that can be solved but were left as-is? Conversely, did an external party intentionally misinterpreted those numbers so that that party can paint a different picture that what Twitter actually claims?

Yea, makes sense. Seems like it will be hard to prove malice over incompetence and vice versa.

There's no standard or foolproof way to find bots, otherwise we'd be able to just ban them all. It all requires judgement. Twitter's statement is acknowledging this fact and legally covering themselves from people just like Musk who might go "well I have my own calculation metric and it says there's more."

Maybe, but that's just not how it normally works and Musks reality distortion field does probably not include the courts. You sign a terms sheet conditional on DD and only afterwards do you move to put in a binding offer. Doing it in a different order is a waste of effort, after all, what's the point of doing DD after you've already made a binding offer? You can't use it to change the deal parameters and you can't use it to break it up.

I imagine the argument is whether the method Twitter used, and was seemingly acceptable by SEC, is ethically, morally, or logically a reasonable measure.

E.g. Can they 100% say that there are less than 5% bot accounts, or is that 5% number being pulled out of their ass - and saying "less than 20% of accounts are bots" would hold as much water? That is therefore then a misrepresentation, fraud IMHO - and stockholders should be suing not only Twitter but also the SEC.

You're missing that they never promised that there are only 5% bots. They said they estimate five percent based on their internal research, which is completely true as far as we're currently aware. Unless you can prove they intentionally faked their own internal investigation, you'll have a very hard time proving fraud.

Also, then there is the fact that Elon apparently even didn't believe this number. So even if he proves it's faked and the court agrees that this is actually a major dealbreaker (which is already near impossible), Twitter could still argue that he was completely aware of the bot situation when he made the offer.

So if you have a home inspector inspect a house before you buy it, and they say "yeah, it looks good" - but it turns out they didn't actually investigate in a way that arguably involves an adequate amount of integrity or in a reasonable way to determine as accurately as possible that everything is sound - then you don't think that home inspector isn't liable? And what if the professional organization who has the responsibility of regulatory oversight of that profession, what if they're been lacking and not being responsible as they are supposed to be, allowing for poor analysis as the standard - are they guilt-free too?

> if you have a home inspector inspect a house before you buy it, and they say "yeah, it looks good" - but it turns out they didn't actually investigate

Home inspectors follow well-established practices. Bot estimation for Twitter has no such analog. The closest might be the seller saying they've seen rats but never looked into it. You say fine, I'm buying to clean it up anyway; waive inspection rights; commit and then discover a rat's nest.

Unless you can show the seller knew about the problem and lied about it, you're going to get your case thrown out of court. Now add multimillion dollar teams of lawyers and bankers advising each side prior to entering into the transaction and we have an approximation of the stupidity of this case.

"Bot estimation for Twitter has no such analog."

And that's acceptable there isn't well-established/widely accepted practices?

Certainly Twitter and SEC will argue that to protect themselves from scrutiny and legal issues they likely deserve.

Yes it is, because Twitter has no close analogues. There’s nothing to base an industry-wide standard on.

All company figures involve some level of trust that they’re based on correct processes as signed off by audit firms. For areas of material interest you’re supposed to do due diligence before signing final offers, but Musk explicitly waived that for some bizarre reason.

If you can't with 100% certainty determine the number of real users you have you shouldn't be putting out any number, and second to that, you have to be open to challenges that "your"/their analysis isn't reasonable; from what it sounds like, based on what Elon had said or alluded to, the way Twitter determined bot % was they had staff manually and "randomly" select literally just 100 accounts, and based on their own observations, decided if accounts were bots or not. If that's true, the obvious problem with that, is bots are designed to mimic to blend in and look like humans - to have the same or similar behaviour patterns to not be outside an expected range of behaviours.

So, what might really be going on is: Twitter's able to detect that less than 5% of users are unsophisticated bots, but they're unable to determine how much of the remaining 95% are sophisticated bots that accurately enough mimic human behaviour; and so it's not possible to genuinely say "less than 5% are bots."

You have not done enough work to understand this issue before picking a side, and it shows.

For one, this is not about what percentage of Twitter users are bots.

Nor have you accurately or fairly described Twitter’s methodology for verifying their mDAU figures.

I think your intuition that the SEC passes judgement on reasonableness of made up metrics is...doubtful.

IANAL, but "we use our own metric" doesn't sound like an excuse for publishing numbers to shareholders that aren't a best effort estimation based on reasonable methods.

If the methods were reasonable is of course possible, but up for debate and at least questionable.

IANAL, but I'm not sure if it matters, as long as the methodology is published? "Here's the number, here's how we calculate that number, don't buy shares if you think our methodology sucks" sounds reasonable to me, especially if they don't have a different number internally that they use to drive the decisions?

> They covered themselves very clearly,

I am shocked, just shocked that a company with six billion dollars of cash on hand is able to afford good enough lawyers who make their SEC reports ironclad against shareholder lawsuits. Who would've thought.

Best part is that if Musk loses and the court enforces specific performance, he just bought a company that just paid for all those lawyers to fight him out of the company treasury!

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.

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.

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.

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.

If there are too many bot activities, user may completely turn off notifications and reduce the usage.

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.

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)

At that level of intelligence I bet it can drive a car.

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.

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.

> (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_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."

> 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.

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.

People are missing the obvious story. He locked himself into a price, then the price of things crashed. It has crashed so much that he's honestly better off just walking away and losing the billion dollars... but he doesn't want to lose a billion dollars so he's gonna do whatever he can do to get out of it.

He could lose a lot more than a billion.

He could lose the entire amount he pledged.

Possibly. But it seem unlikely. The deal explicitly says he can back out for a billion dollars.

No it doesn't say that, it says that if his third party funding falls through then he's on the hook for a billion dollars instead of buying the company.

There's nothing in the contract about a billion dollars fee for any other reason of the sale not going through.

Of course, a judge could choose to take that number as the amount to punish with, but it's not a price Musk can just choose to pay to get out of the deal.

That is not a backout clause but protection against the deal not getting necessary approval.

Only if the deal fails outside reasons like regulatory action. Simply changing your mind, or claiming that you should have done due diligence after you explicitly waved it, doesn't count.

Personally, I want the court to rule for specific performance (ie. Pay the $44 billion) He fucked up.

Such confidence without reading it

Why do people keep saying this? It's so trivially easy to disprove.

Oh it's definitely not about a billion dollars. He'd pay that out in an instant if he could. The contract he signed and the law itself is not on his side, he may yet slither out of his commitments, but Twitter would never settle for a mere $1B when they've lost so much more in value due to him.

Twitter hasn't lost anything due to him? Their share price would likely be lower if not for his dumb shenanigans. The contract is pretty clear that he can walk away for $1B, which is a lot of money.

That's not what the contract says. The $1B breakup was only if bank financing fell through, which it did and has not. The banks are still bound by their commitment letters to provide the required financing, and it doesn't look too plausible they could back out of those contracts.

Levine covered it well here:

https://www.bloomberg.com/opinion/articles/2022-07-09/elon-s...

> 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.

And the Twitter board was also very much publicly saying, "don't buy us."

Clearly reverse psychology, confirming that this was indeed their play all along!

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.

I'm very much looking forward to my "I called it!" moment :-)

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.

> 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.

Both.

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

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.

Seems like this is the correct answer. Musk is just putting himself in that class.

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.

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.

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.

Twitter has the facts and the law on their side, so they most certainly care about the merits.

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.

>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.

> this is all just a very public and showy exercise to negotiate on a new price during a settlement.

Why would Twitter want to negotiate on a new price? There's already the agreement at a high price - why would they go lower?

> 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.

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

> 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?

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…

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.

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.

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.

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.

> 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.

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.

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.

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.

I don't think it would be verified by somebody being given access to Twitter's internal data and redoing their process. At most both sides will trot out some expert witnesses to talk about whether the process / rating guide described in the internal docs are reasonable (what Twitter does doesn't need to be perfect, just not outright fraudulent). I look forward to finding what kind of a kook Musk finds as his expert.

Maybe Musk hopes to find something in discovery to discredit the process, e.g. evidence of the process not being followed, or of the numbers being tampered with.

> I don't think it would be verified by somebody being given access to Twitter's internal data and redoing their process.

Indeed. But surely they have at least internal audits. They seem like they take this stuff seriously.

> I look forward to finding what kind of a kook Musk finds as his expert

Indeed! If he picks his experts like his lawyers, this could be spectacular.

> e.g. evidence of the process not being followed, or of the numbers being tampered with

Yeah, he sounds like he’s hoping to find a smoking gun where some Twitter higher-up admits fudging the numbers. To be fair, if that is true, then Twitter deserves to be raked over the coals, even though it would not be sufficient to get Musk out of this mess.

> No. Nobody outside of Twitter can repeat the analysis.

This is true of most material statements provided by companies in every industry:

- Revenue? Trust the company, I cannot independently verify from outside the company.

- Retail same-store sales comparable? Have to trust the company's numbers.

- Headcount? I have to trust their number again here.

- Expenses? I have no way to verify this unless I work at the company, in a very senior position.

Outside verification of data is not a concern relevant to corporate disclosures.

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