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The Courts Twitter

The Three Reasons Why Elon Musk Called Off His Acquisition of Twitter (theregister.com) 359

Elon Musk just tweeted a picture of himself laughing — along with a caption he'd apparently added himself.

"They said I couldn't buy Twitter. Then they wouldn't disclose bot info. Now they want to force me to buy Twitter in court. Now they have to disclose bot info in court."

In fact, tonight The Register cited one of the documents Twitter filed in court after Musk's lawyer argued Twitter had "failed or refused" to provide info on spam accounts. But so far it's just a letter Musk's lawyer wrote to the court on Friday, explaining in more detail why Musk wants to call off the acquisition: One segment of the document claims that Musk and his team sought "a variety of board materials, including a working, bottom-up financial model for 2022, a budget for 2022, an updated draft plan or budget, and a working copy of Goldman Sachs' valuation model underlying its fairness opinion."

"Twitter has provided only a pdf copy of Goldman Sachs' final Board presentation."

Other disclosures, the document states, "come with strings attached, use limitations or other artificial formatting features, which has rendered some of the information minimally useful to Mr. Musk and his advisors.

"For example, when Twitter finally provided access to the eight developer 'APIs' first explicitly requested by Mr. Musk in the May 25 Letter, those APIs contained a rate limit lower than what Twitter provides to its largest enterprise customers. Twitter only offered to provide Mr. Musk with the same level of access as some of its customers after we explained that throttling the rate limit prevented Mr. Musk and his advisors from performing the analysis that he wished to conduct in any reasonable period of time.

"Additionally, those APIs contained an artificial 'cap' on the number of queries that Mr. Musk and his team can run regardless of the rate limit — an issue that initially prevented Mr. Musk and his advisors from completing an analysis of the data in any reasonable period of time," the document states.

Musk and his team raised the issue of query limits on June 29, but Twitter did not change the limit until July 6 — after Musk asked for its removal a second time.... Musk felt Twitter was in breach of the merger agreement. So he pulled the plug, leaving open the questions of why Twitter might have provided only limited access to its APIs, or why it could not offer more access given it operates at significant scale.

In fact, it's one of three reasons for ending the acquisition that Musk's lawyer makes in the letter. Materially-relevant figures on spam accounts were reason number one. ("Twitter has not provided information that Mr. Musk has requested for nearly two months notwithstanding his repeated, detailed clarifications intended to simplify Twitter's identification, collection, and disclosure of the most relevant information sought in Mr. Musk's original requests.")

But there's more... Musk's lawyer also argues Twitter is in breach of the merger agreement because of "materially inaccurate representations" — specifically their figures on monetizable daily active users. While Musk's analysis "remains ongoing, all indications suggest that several of Twitter's public disclosures...are either false or materially misleading." While Twitter has claimed they have a reasoned process for calculating monetizable daily active users (and the percentage of spam accounts), Musk's lawyer argues that instead the process "appears to be arbitrary and ad hoc," rendering Twitter's statements "false and misleading." And thus, "Mr. Musk has the right to seek rescission of the Merger Agreement in the event these material representations are determined to be false."

But finally Musk's lawyer provides a third reason for ending the acquisition. Twitter was required to "seek and obtain consent before deviating from its obligation to conduct its business in the ordinary course and 'preserve substantially intact the material components of its current business organization.'" The lawyer's letter argues that didn't happen: Twitter's conduct in firing two key, high-ranking employees, its Revenue Product Lead and the General Manager of Consumer, as well as announcing on July 7 that it was laying off a third of its talent acquisition team, implicates the ordinary course provision. Twitter has also instituted a general hiring freeze which extends even to reconsideration of outstanding job offers. Moreover, three executives have resigned from Twitter since the Merger Agreement was signed: the Head of Data Science, the Vice President of Twitter Service, and a Vice President of Product Management for Health, Conversation, and Growth.
But Twitter hadn't received "consent for changes in the conduct of its business, including for the specific changes listed above," according to Musk's lawyer, which "therefore constitute a material breach of Section 6.1 of the Merger Agreement."
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The Three Reasons Why Elon Musk Called Off His Acquisition of Twitter

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  • by Maxo-Texas ( 864189 ) on Monday July 11, 2022 @02:37AM (#62692218)

    I mean seriously... all it does is present musks' position without context or comment from twitter's side.

    • by Anonymous Coward on Monday July 11, 2022 @02:52AM (#62692248)
      If only Twitter had a platform to tell us all what they think...
    • by 93 Escort Wagon ( 326346 ) on Monday July 11, 2022 @02:54AM (#62692252)

      I mean seriously... all it does is present musks' position without context or comment from twitter's side.

      And a non-trivial percentage of Slashdotters will lap it up without reservation.

      I suspect at this point all Musk is really after is a negotiated reduction in that 1 billion dollar back-out penalty he agreed to. He knows he isn't in a strong position. I imagine his lawyers tried to tell him (maybe multiple times) to do due diligence before making a formal offer - but he doesn't like other people telling him he can't do whatever he wants.

      • Re: (Score:3, Insightful)

        by pjrc ( 134994 )

        Hopefully his extraordinarily bad faith "media circus" behavior ends up with liability to shareholders far exceeding the $1B cancel fee.

        • I may be wrong, but this will end up with Musk being forced to pay way more than $1bn. The original deal was worth 44 times that.

          • by stabiesoft ( 733417 ) on Monday July 11, 2022 @08:05AM (#62692770) Homepage
            I hope so, but whatever, if this goes to even discovery phase, it is going to be popcorn time. If it makes it to trial and we have people like dorsey and musk on the stand, caramel corn time. Dirty laundry would be aired on both sides. Just the under oath description of dorsey/musk discussing the deal is priceless.
          • Doubtful. He can keep it tied up in court pretty much indefinitely and Twitter will settle just to get it over and done with and out of the news cycle. He knows perfectly well that this hurts Twitter to keep it dragging on. So he can use that as leverage to force them to settle for a nominal fee.

            The mistake was Twitter thought they could use our legal system to hold a member of the ruling class to their word. That's not how our legal system works. Once you have a certain amount of money in this country
            • Delaware is the most friendly states to corporations when it comes to this kind of thing, which is why so many companies choose Delaware for the state they incorporate in. Musk is about to find this out, because Twitter holds a pretty big home-court advantage due to just that. They can file a one-party request for expedited processes from a judge, and they'll get it because of the way that corporate law is structured in Delaware. This thing could be in front of a jury in a few months, not a few years. And when they have a waiver on due diligence, a 10-figure backout fee, and a friendly court that will break through the obstruction and delay tactics - they aren't going to settle.

              They want the $44B. But if they can't have that, then $1B + legal fees and knocking the legal shit out of the richest guy in the world very publicly is a pretty nice door prize; especially considering that it will be very good press for Twitter to give an ersatz-untouchable billionaire American Oligarch a very black eye on basically every news report for many nights to come.

              Twitter is going to realize far more than the money granted them at the end of this thing. This thing has turned into a massive gift for them.

      • More likely he still plans to buy it, but at a greatly reduced price. If Twitter is suing him to complete the acquisition, then he probably has a pretty strong negotiating position.

        • Is Twitter is suing him to complete he acquisition, is for the full $44bn he signed for - anything else than that and the company would be (righfully) flooded with shareholder lawsuits.

          The only real negotiation to be had is how much Musk will hurt by bailing out of the deal.

        • More likely he still plans to buy it, but at a greatly reduced price. If Twitter is suing him to complete the acquisition, then he probably has a pretty strong negotiating position.

          This take is worth a chuckle,

          Musk has no negotiating position. He owes Twitter at least a billion dollars to walk away, or he owes it 44 billion if he does not (and he is already clear that he is not going to buy it). It is quite possible he will owe it much more than the one billion dollars since making bad faith offers to manipulate stock market prices are crimes.

          What you describe is a pure fantasy.

          • Re: (Score:2, Informative)

            by Lisandro ( 799651 )

            He owes Twitter at least a billion dollars to walk away, or he owes it 44 billion if he does not (and he is already clear that he is not going to buy it).

            Note that the $1bn bailout clause only applies if both parties agree to it - and Twitter has already clearly stated they don't.

            You're otherwise 100% correct. It's pretty incredible to see Musk fanboys (and Musk himself!) trying to convince themselves this is some sort of genius 4D chess move.

      • The back-out only applies if he can't get financing or regulatory agencies halt the sale, it was never an open ended back-out.. If he voluntarily backs out it's messier. The contract says that he agreed to buy, and that there's a price that is no longer negotiable. Given that Twitter has been severely damaged here by Musk, the renegotions won't be pretty, and I suspect Musk would gladly just walk away for only $1 billion if he could, as that is really the lowest he could pay in the best possible outcome.

    • by vivian ( 156520 ) on Monday July 11, 2022 @03:06AM (#62692266)

      Is it just me, or is firing the guy in charge of managing the stuff that brings in the money in and firing the guy who's in charge of managing the product that's sold (the customer base) slightly suspicious when there's ongoing questions about both of these aspects of the business?

    • Seems like Musk just wants to run twitter by proxy by dangling 44 billion carrots in front of them without ever actually following through.
    • Re: (Score:3, Funny)

      by mrex ( 25183 )

      I mean seriously... all it does is present musks' position without context or comment from twitter's side.

      If you want to see the reverse, just go to MSNBC or any number of other major media outlets.

    • by jythie ( 914043 )
      Yeah, when printing a story about a conflict between two unreliable parties, you really need to be a bit more balanced. A 'just one side' piece, even if it contains interesting information, does not stand well on its own.
    • I mean seriously... all it does is present musks' position without context or comment from twitter's side.

      How is that a biased headline? It's clearly Elon Musk's reasons to call off the acquisition.
      I'm sure Twitter and their legal representatives will respond, and then we can have a new headline "Twitter's response to Elon Musk's accusations"

  • by narcc ( 412956 ) on Monday July 11, 2022 @02:39AM (#62692224) Journal

    He never wanted to buy it in the first place. He just wanted an excuse to pull a few billion out of Tesla.

    • by DrXym ( 126579 )
      I'm sure if that were the case he could have used the same money to buy something more aligned with his other businesses than a social media platform.
      • Re: (Score:3, Interesting)

        by Maxo-Texas ( 864189 )

        I don't know. I was a fan of Musk but he's starting to feel a bit like Howard Hughes to me.
        Sometimes the smartest are more prone to lose it.

        • I agree - I asserted the parallels to Mr. Hughes several years ago.

    • Possible. Myself, I was just gonna go with: Attention whore gets attention for buying Twitter...attention dissipates...gets attention for NOT buying Twitter.

    • by sinij ( 911942 ) on Monday July 11, 2022 @08:18AM (#62692806)

      He never wanted to buy it in the first place.

      You should put your mind-reading talents to a better use than just flaming Musk on /.

  • His reasons suck (Score:3, Insightful)

    by DrXym ( 126579 ) on Monday July 11, 2022 @02:53AM (#62692250)
    The real reason he wants out is he fucked himself. In his ego fuelled haste to buy Twitter he didn't bother with any of that letter of intent / NDA / due diligence nonsense and instead signed a contract to buy the company. And then the market turned.

    He played himself and the Twitter board is going to compel him through the courts to either buy for the agreed price or leave with a penalty. All his cited "reasons" are just pathetic excuses why he shouldn't be party to the deal he signed. If he was worried about the number of bots, despite Twitter giving figures he should have done all that due diligence stuff beforehand.

    • Re: (Score:2, Interesting)

      by AmiMoJo ( 196126 )

      There are probably good legal reasons why Twitter didn't give him everything he asked for. For example, full access to their APIs would almost certainly have been a GDPR violation. I contacted Twitter after he expressed interest and warned them that I never gave consent to give any of my data to Mr. Musk, and that I was explicitly stating that nothing non-public should be shared with him.

      • by MrDoh! ( 71235 )
        And without an NDA /really/ all sorted out, considering Musk's prior use of Twitter, he'd be blaring that info out on Twitter in revenge/screw the stock price/something else moronic. No, seems like Twitter played the "look, you agreed to skip all this stuff before, you even bragged about clearing the bots before even looking the data, and NOW you're starting to do due diligence?"
        • by Luckyo ( 1726890 )

          And the in the OP there are points aimed at specific clauses within the contract that require things that weren't delivered. "But skipped due diligence" in this case is simply a talking point that isn't reflecting reality.

      • by Ecuador ( 740021 )

        I don't see how GDPR is relevant. We are talking about rate limiting, not lack of access. GDPR doesn't differentiate between "a little" or "a lot" of data, if that was the concern he would have not been given access. Apparently he was given the APIs other enterprise clients get anyway, just with lower rates.
        Why are you so concerned about Musk in particular, all the other unnamed enterprises are fine?

        • Re: (Score:2, Insightful)

          by AmiMoJo ( 196126 )

          The rate limiting is a trust issue. Twitter doesn't normally give people immediate unlimited access, they give rate limited and see if it gets abused.

          Just having access to the API doesn't allow GDPR violations. People with access are expected to use it responsibly, in compliance with relevant laws. For example, if they see that an account is associated with a GDPR country, they must comply with those rules when handling its data.

          My private data isn't shared with unnamed enterprises, because I declined to gi

    • by orlanz ( 882574 )

      It will probably end up settling with a penalty. Buyouts with animosity within participants aren't usually supported by 3rd parties. It just leaves the stakeholders, operations, and employees poorer at the end. They will support a "What will it take to walk away and forget it ever happened" type of resolution.

      Both Twitter and Tesla are publically traded companies. Making publically material statements that are realistically executable are almost equivalent to legal paper work. It was a stupid thing for

  • by bloodhawk ( 813939 ) on Monday July 11, 2022 @03:01AM (#62692260)
    Really sounds like he was simply searching for a reason to bail out, all mouth and this time his mouth almost cost him a lot of money. The items raised all seem rather petty and certainly nothing thus far to suggest a reason to cancel.
  • Real reasons (Score:5, Insightful)

    by backslashdot ( 95548 ) on Monday July 11, 2022 @03:05AM (#62692264)

    1. A temporary fit of anger/rage inside him generated hormones that impeded or amplified neurotransmitters that in turn blocked rational thought, broad empathy, and consequence weighting.
    2. He wanted to control the narrative of people who oppose his views and according to his fear, interfere with the success of his companies by placing legal obstacles. The right-wing claims they support free speech, but get pissed off when they are subject to fact-check and context statements.
    3. No longer an underdog needing support from the left, he now wants protection and favors from the right-wing. Covid lockdowns, unionization possibilities, subsidization of up & coming EV companies, and the threat of unrealized wealth-taxation constitute a perceived threat to his business existence.

    More Musk analytics: https://tech.slashdot.org/comm... [slashdot.org]

  • This reeks of "I didn't want to come to your stupid party anyhow!"

  • I think Musk is just haggling over the price - he wants a discount based on the excess number of bots (above the 5% claimed by Twitter originally). Which seems fair to me. This whole process is a way to force Twitter to disclose the bot count, and accept a discounted price.

    I think Musk will end up buying Twitter in the end.

    • "Haggling over the price"?

      The price is set. Musk signed a purchase agreement with a figure on it.

      • Re: (Score:3, Insightful)

        by OldMugwump ( 4760237 )

        The price is set it the conditions of the purchase agreement are met, which include the number bots.

        If the conditions are not met, the contract is void. That's what Musk is claiming.

        If he's correct and there are more bots than claimed by Twitter (this will come out in court), then the contract to purchase is void, and Musk can walk away. Or, Twitter can offer a discount to the original price if they still want the sale to happen. Which is what Musk is counting on.

        • by Lisandro ( 799651 ) on Monday July 11, 2022 @05:41AM (#62692432)

          The price is set it the conditions of the purchase agreement are met, which include the number bots.

          If the conditions are not met, the contract is void. That's what Musk is claiming.

          Yeah. And then the contract is *voided*. There's no negotiation room; that ended once both parties signed on it.

          If he's correct and there are more bots than claimed by Twitter (this will come out in court), then the contract to purchase is void, and Musk can walk away. Or, Twitter can offer a discount to the original price if they still want the sale to happen. Which is what Musk is counting on.

          Sorry to pop your bubble, but a) it is not correct and b) Musk is hoping to cancel the entire deal. It was bad business to begin with, and it is even worse now that TSLA tanked, burning a hole on his net worth.

          If he could have the ability to unilaterally trigger the $1bn bailout clause, he'd already done so.

    • by Luckyo ( 1726890 )

      That was my take as well. Basically public haggling + establishing the need to improve the platform more firmly when employees start bitching that "we had a fine platform already, no dramatic changes needed".

    • by Junta ( 36770 )

      I think his history indicates more this being a publicity stunt.

      He has a history of 'trolling' behavior with financial stuff, where he states some big financial thing, the media treats it at face value, then ultimately he laughs at everyone for actually believing what he said. The more his status has elevated, the more he has been prone to off the cuff crazy statements that he always backs down from.

  • I saw an article somewhere (not on Slashdot though) that said that some are now speculating that he never wanted to buy Twitter to begin with and it was all a cover for a massive approximately $8.5 billion sale of Tesla stock so that such a large sale wouldn't depress the price. Honestly this makes more sense than some of the other suggested reasons. But yeah, I do agree that given the objections Musk's legal team raised it does seem like the interest in buying Twitter wasn't really serious.
    • While he has done plenty of stupid things in the past regarding sales of stock, doing it in "one go" is the flaw, not finding a reason to do it. He should file a stock sales plan that identifies a duration of the sale, and minimum and maximum daily transaction totals. It isn't a big deal when you spread it out slowly over a couple months.

      Alternately, sell call contracts, ladder the hell out of them, and dispose of the shares that way. Do it from a blind trust.

      Reality is that Elon got caught with his dick

  • by Opportunist ( 166417 ) on Monday July 11, 2022 @04:11AM (#62692324)

    Why should I care?

    Honest question.

    • Because a sale (and maybe even an intention of a sale) is enough reason to bypass all privacy laws. He wanted the data, not the system.
    • You should care because Twitter is important, like it or not.

      Why you do care I don't know, but you came here to leave a comment, so you clearly do.

      • It's more like seeing reality TV shows day in and day out and finally wanting to know, after seeing what they are like, what the hell people watch them for.

  • i'm already preparing popcorn to watch this case on court. Musk will be gutted.

  • End of the day, the controlling interests in twitter will continue to pump more money into it because it's a media outlet that can censor the president of the united states. It is far too powerful to let fall into the hands of Musk.
    • Literally any media outlet can choose not to amplify a president's speech.

      Yes, literally literally.

  • Twitter knows it will finally have to disclose the bot accounts and their reluctance to disclose what they know cant be avoided implies the numbers are really bad - probably 25-30% accounts are bots. TBH some of the bot/automated tweets/retweets are quite useful. or funny.

    Twitter is just trying to delay the inevitable as they know Advertisers will sue them and demand back the Billions they paid for advts based on gross misrepresentation of active users.

    Jack Dorsey exiting was itself the biggest signal for i

    • Twitter knows it will finally have to disclose the bot accounts and their reluctance to disclose what they know cant be avoided implies the numbers are really bad - probably 25-30% accounts are bots. TBH some of the bot/automated tweets/retweets are quite useful. or funny.

      Twitter does disclose the number. It's less than 5%.
      Of course, that number may be (and probably is) wrong as fuck. But their disclosure mentions that as well.

      So no, the "real" count won't be in the discovery. Because it's going to be the same that's in the SEC filing.
      And if Musk tries to say, "well that number is bullshit!", a Judge is going to say, "bullshit because it's wrong, or bullshit because the claimed methodology is fraudulent?".

      If the former, Musk will be told to kick rocks. If the latter, T

  • I don't think a court will allow people quitting to stand as Twitter making significant changes. You can't stop people quitting if they want to. I'm not sure how the other parts will stand up, if those fired were fired because they violated some existing policy then that is business as usual. The hiring freeze stuff is shakier, but the whole industry is doing similar so it could be argued that is just normal business processes rather than significant change.

    I don't think he'll find the bots he's looking for

    • I don't think a court will allow people quitting to stand as Twitter making significant changes. You can't stop people quitting if they want to.

      I don't think it's even relevant unless it materially affects operations. The people aren't part of the corporation, which is a legal fiction. In general corporations are designed to be operated by anyone who can fill a role, people are meant to be interchangeable.

    • by dyfet ( 154716 )

      Indeed, he signed a binding agreement under conditions that suggest only his own stupidity. I have yet to hear anything that would seem a true material breach by Twitter. He chose not to do due diligence, and the courts are not there to protect people from their own stupidity, unless his legal team wishes to assert incompetence or some form of mental disability. Personally I think Twitter and Musk truly deserve each other...

  • by waspleg ( 316038 ) on Monday July 11, 2022 @06:32AM (#62692540) Journal

    that has more detail than I've seen anywhere else. [wikipedia.org]

    Like, the cabal of banks thinking a 7x leverage on Twitter earnings was too risky to loan Musk all the money he asked for, and subsequent funding included the Saudi Prince he publicly talked shit to about free speech [bloomberg.com]. I guess he also registered 3 "X Holdings" companies 2 days after announcing his bid...

  • He was manipulating stock prices.

  • They mean "President Musk"!
  • Read Matt Levine (Score:5, Interesting)

    by jacks smirking reven ( 909048 ) on Monday July 11, 2022 @08:32AM (#62692868)

    Who is a former acquisitions attorney at WLRK Law Firm and current Bloomberg writer (Twitter just secured WLRK to represent them in this) who has had pretty spot on analysis this entire time.

    Elon's Out [bloomberg.com]

    Is it fun for him? If he manages to walk away having spent only millions in financing fees, millions in legal fees and say $1 billion in termination fees, was it worth it? What did he get out of this? The guy really seems to like being on Twitter, and he did make himself the main character in Twitter's drama for months on end. That’s nice for him I guess. Also he made the lives of Twitter’s executives and employees pretty miserable; as a fellow Twitter addict I can kind of see the appeal of that? I always assume that “everyone who works at Twitter hates the product and its users,” and I suppose this is a case of the richest and weirdest user getting some revenge on the employees. He also gave himself an excuse to sell a bunch of Tesla stock near the highs. He maybe got an edit button too? Maybe that’s worth a billion dollars to him?

  • by dskoll ( 99328 ) on Monday July 11, 2022 @09:07AM (#62693000) Homepage

    All Twitter needs to do is this:

    Elon Musk: This account is suspended. It will be reinstated when he purchases Twitter.

    Musk is such an attention-seeking blowhard he'll cave within days.

  • Slashdot arrogance (Score:5, Insightful)

    by RogueWarrior65 ( 678876 ) on Monday July 11, 2022 @09:13AM (#62693018)

    The first filter one has to apply to this story and similar ones playing out elsewhere in the media is the assumption that the author is smarter than Elon Musk. Highly unlikely. One simply does not get to the level that he has by being stupid. If the authors were smarter than he, they would be captains of industry not a slashdot commenter.

    The second filter is the assumption that Elon Musk is the only person involved and that it's solely him against the oh-so-enlightened Twitter board. There is a small army of smart people looking at every aspect of the deal to find the flaws in it just like there is an army of people looking at SpaceX rockets to find and fix any issues. Sure, SpaceX failed three times before having a successful launch and failed several times at landing the thing. SpaceX hired the best and worked the problem. SpaceX isn't a publicity stunt like Blue Origin or Virgin Galactic. It's practical. That's what comes from having an engineer at the helm.

    Twitter clearly is trying to prevent Toto from pulling back the curtain to reveal the blowhard wizard. If they were confident in their assets, they wouldn't be trying to hide anything or limit access. Billions of dollars are at stake. That amount of money trumps wokeness every time.

"Live or die, I'll make a million." -- Reebus Kneebus, before his jump to the center of the earth, Firesign Theater

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