If that's true, it kind of makes the question moot.
I don’t think he has a shot in hell at demonstrating fraud, given the various disclaimers around the quoted figure.
And, if he’s saying the real number is 10%, he just doesn’t have close to a shot at reaching the material adverse effect bar (which lawyers have told me is a very high bar in Delaware courts).
So, on the narrow path that he can navigate after signing away his soul and due diligence waivers, he’s still totally hosed.
He really shouldn’t have signed that contract.
But, I think the facts of this case almost certainly foreclose that path.
It seems like people like to exaggerate both ways.
Yeah, I disagree.
Buying into Elon Musk’s bullshit is a gigantic waste of time.
Everyone can disagree at any time. It's a discussion forum where diverse opinions are welcome.
Are you gonna yell "water is wet" next?
> Twitter made it clear its bot number could be wildly off
An example:
NVIDIA made it clear that they don't have full and accurate information of what their buyers use their chips for. Maybe some customers buy NVIDIA to hold and do chicken dance? who cares?
Yet they were charged by SEC for not identifying that a large chunks of their buyers used it for crypto mining. Because this misled investors and shareholders on the company's outlook.
The disclaimer doesn't protect the company from reporting wildly inaccurate numbers.
Can you define with specificity what the “twitter bot number” is? Because Twitter doesn’t claim that 5% or fewer of accounts are bots.
They claim that “according to their ongoing reviews and subjective numbers” less than 5% of accounts they qualify as an monetizeable user are “false or spam”.
Twitter could be 90% bots and spam, and not be even slightly inaccurate in their statement to the SEC, if they were correctly identifying those accounts and only tracking the remaining 10% as monetizable accounts.
Further Twitter very clearly disclaims that identifying a “false or spam” account is a subjective measure that requires them to apply “significant judgement” to determine. Because it’s subjective, it wouldn’t be sufficient to show “the bot number” (which I’m going to treat as “the percent of mDAU which are false or spam accounts”) is 30%. You’d also have to show that Twitter knew that their process and judgement were flawed to the point of deliberately being deceptive.
Below is the specific statement Twitter put in their quarterly 10-K filings. I don’t see them catching a charge from the SEC for merely being wrong.
> The numbers of mDAU presented in this Annual Report on Form 10-K are based on internal company data. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement across our large number of total accounts around the world. Furthermore, our metrics may be impacted by our information quality efforts, which are our overall efforts to reduce malicious activity on the service, inclusive of spam, malicious automation, and fake accounts. For example, there are a number of false or spam accounts in existence on our platform. We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the fourth quarter of 2021 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. We are continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our mDAU, and have made improvements in our spam detection capabilities that have resulted in the suspension of a large number of spam, malicious automation, and fake accounts. We intend to continue to make such improvements. After we determine an account is spam, malicious automation, or fake, we stop counting it in our mDAU, or other related metrics. We also treat multiple accounts held by a single person or organization as multiple mDAU because we permit people and organizations to have more than one account. Additionally, some accounts used by organizations are used by many people within the organization. As such, the calculations of our mDAU may not accurately reflect the actual number of people or organizations using our platform.
Yes, it's just a short version for the sake of the discussion.
Let's just say this number is not 5%. It's 30% when evaluated by an independent third party.
Other comments claim that this number can be 90% 80% and it wouldn't matter. Twitter would be relieved of all responsibilities because they said it was "subjective".
This is where I disagree.
> You’d also have to show that Twitter knew that their process and judgement were flawed to the point of deliberately being deceptive.
This is where the discovery comes from. You'd imagine it is impossible, but it's not. It may be still hard, sure, but not impossible.
Twitter would be requested to open up all emails/docs for discovery to both sides of lawyers.
Twitter has 8000 employees(?). You can bet there will be at least one person pointing out in the email/doc that "hey, our approach of evaluating numbers doesn't look right, and here's why....". Then, that person has been ignored.
Twitter would be requested to open up data for discovery for third parties to investigate.
Coming up with a number like this will inevitably have multiple valid approaches. An independent third party can easily pick a more conservative approach (because you are supposed to err on the side of less attractive when reporting earnings). Then, pairing this with Twitter execs ignoring that one concern from employee can result in a really bad situation for execs.
Apart from that, opening up emails like this would incriminate a lot of other unrelated stuffs like employees know about Russian bots that swayed the election results, employees know about fake news but not doing anything about it.
I don't see any other comments saying the number can be 90% or 80% (other than mine, where I was pointing out the difference between before removal and after removal). Can you cite Which comments specifically are you referring to and whihc part of them you're disagreeing with? I'm just not seeing that.
I mean, it's fine for you to disagree with _that_, but it seems like you're disagreeing with a straw-man.
> You'd imagine it is impossible, but it's not
I wouldn't imagine it would be impossible. I think it's unlikely, but it's always possible that Twitter is perpetrating a deliberate fraud in its SEC filings. My priors on that are pretty small (1-5%?), but sure, of course it's possible.
If Twitter is actually perpetrating a deliberate fraud, and Elon is able to get the goods in discovery, then sure he'll likely win the case. That's a really high bar, though, and does not square with your prior argument that if a third-party analysis comes to a 30% bot number, then the SEC will bring charges.
That's simply not sufficient to cause the SEC to bring charges. Rather, you would need the additional evidence you think might come out in discovery.
My point is this: "The true bot number is 30%" and "The true bot number is 30%, and Twitter knew that and deliberately lied in its SEC filings" are two different statements. One is sufficient to bring a charge, and the other is not.
> You can bet there will be at least one person pointing out in the email/doc that "hey, our approach of evaluating numbers doesn't look right, and here's why....". Then, that person has been ignored.
Is is possible? Sure, of course. Would I put a bet on that exact scenario happening? Probably not.
Seems just as likely that someone sends the email that "our approach doesn't look right, and here's why...", and someone engages and responds with "I disagree, that methodology does X, and we chose to do Y because Z, but let's talk about it". Or, I could also see absolutely nothing internal on this because it's a box-ticking exercise as part of their SEC filings and nobody internal really cares.
> Coming up with a number like this will inevitably have multiple valid approaches.
The problem is that its not enough to show that someone else has a different valid approach. The need in court (and for the SEC) would be to show that Twitter's approach is not valid. It's really not enough to show that Twitter could have made different choices and got a different outcome. You need to show that Twitter's approach and outcome was unreasonable.
Anyway, my fundamental disagreement with your statement is that a "bot rate" of 30% automatically implies fraud and an SEC charge. I don't think it's that simple.
If they signed off on it, he has no case. If they warned him against it, and he went ahead anyway, he also has no case.
The judge will rightfully wonder how this isn't anything other than a attention-hungry blowhard trying to get out of scoring the most comical own goal in business history.
Twitter will object, but ultimately some degree of discovery will be allowed (with a more narrow scope), but it will pressure Twitter to settle for a lower purchase price because god only knows what kinds of incriminating shit lawyers will find in employee emails. Internal emails is always a big big random variable which can then spawn all sorts of unrelated lawsuits from discrimination, to regulatory fines, to executives' private life drama, etc...
Even if Twitter is innocent - it is very easy for lawyers to intentionally misconstrue a vague email or threaten so with things found in discovery.
Given the NDAs that would apply to such discovery, were such information to exist and to become public, Musk would likely be imprisoned for contempt of court.
Not simply fined. Imprisoned. And his lawyers would likely be suspended for a few months, if not disbarred. You don't mess with the courts, because they have the power to mess right back.
Musk doesn't need to leak emails.
The discovery by the lawyer team alone is probably scary enough.
There is a high chance that twitter will settle for XB.
At this point, it is just free money for twitter.
Imagine Musk acquires twitter and exposes all internal emails (well, he owns the company) and sue execs one by one for every little thing that is wrong.
Execs are earning 10M/year. For these people, money is not an issue. Getting into a scandal is a huge issue.
The experts seem to think that it's virtually impossible a hypothetical misrepresentation rises to the level of a "material adverse event".
It can't even be his motivation, since he is inherently admitting he doesn't have the evidence yet.
I mean, the trivial case is Musk's discovery reveals some smoking gun email about knowing that their methodology showed 50% mDAU were bots but the CEO overruling everyone and putting 5% on the SEC filing instead. Not close to impossible to prove if it's that stupid (not saying it is)