Twitter again yields to Elon Musk
Whether or not Elon Musk finally manages to purchase Twitter, the process of his trying to purchase the company has been endlessly entertaining. Twitter's employees and board were desperate to avoid having someone come on board and demand that they play fair, allowing political speech even to (gasp!) Republicans. Inch by inch, though, through a ridiculously generous purchase price, along with a lot of subtle threats about shareholder and advertiser lawsuits, not to mention SEC fraud investigations, Musk is forcing Twitter to disgorge its secrets.
The last time I wrote about this, Musk was demanding information from Twitter about the number of bot (i.e., fake) Twitter accounts that could be inflating Twitter's user numbers. This mattered because Musk implied that Twitter had filed fraudulent SEC statements and because the false numbers affected both shareholder and advertiser valuations of the company. And of course, if the SEC statement was false, Musk had been tricked into making an offer for a seriously (and fraudulently) overvalued company. Musk put the deal on hold pending an answer.
Last week, after Twitter had stonewalled him for three weeks regarding the bot numbers, Musk's attorney sent a letter to Twitter threatening to back out of the deal if Twitter didn't cough up the information:
In a letter to Twitter, the billionaire reiterated his request for details on bot accounts and said he reserved all rights to terminate the merger as the company was in a "clear material breach" of its obligations by not providing him with the information.
Given that Twitter's board hates the deal, one might think Musk's letter offered it a way out of a deal it didn't want in the first place. However, that language about "clear material breach," when coupled with the ridiculously generous price per share Musk was offering, was a signal to the board: if you don't provide the requested information and Elon Musk walks, you can expect a massive shareholder suit against you.
Image: Elon Musk. YouTube screen grab.
The not so subtle threat worked, and the board has announced that it is ready to give Musk access to all the information he wants about potential fake accounts:
The social media company will provide the world's richest man with access to a stream of data comprising more than 500 million tweets posted every day, according to the Washington Post. A number of companies already pay for access to the data, which includes a real-time record of tweets, the devices users tweet from and information about the accounts that tweet, the Post reported.
The New York Times also reported that Twitter would let Musk view its "firehose" of daily traffic, in response to legal threats that the deal would be in jeopardy otherwise.
If Musk is correct that the number of fake accounts far exceeds Twitter's claim (placed in an SEC filing) that fewer than 5% of its user accounts are bots...well, let's just say that things will get really fun then. Musk may get a newer, much lower sales price — if he's still interested in the deal — and there may be a whole host of shareholder and advertiser suits against Twitter's management.
I'm less sanguine about an SEC investigation simply because I don't believe that the current administrative state has an interest in looking into malfeasance if progressives are the ones accused. Still, it's very likely that, at the end of this whole Musk episode, Twitter will never be the same, something that's good for America's ideological health.