Rob Peter to Pay Paul
Screw over Tesla shareholders short term to screw over Twitter shareholders long term.
Twitter has reportedly thrown its $44 billion buyout by Elon Musk to a shareholder vote, which could take place around late July or early August. Execs told employees of the plans on Wednesday, according to outlets including CNBC and the Financial Times. The move follows reiterations by Musk's camp that he is prepared to walk …
Especially if it's not 100% horizontal. The easiest way to keep him out of any place is to install ramps, and it also has the benefit of providong easier access for disabled people. Win win.
That said, I have no objection against Trump, Musk and others being launched into orbit.
I have more a problem with them coming back..
It seems like most of Musk's griping comes from him thinking that the 5% bot number is in relation to all Twitter accounts, rather than "monetizable" accounts. Twitter hasn't bothered defining what monetizable means. From what I gather the non-monetizable accounts are the ones that post through the Twitter API rather than the website or app (therefore don't get ads), so that would mean 5% of *those* accounts are bots as opposed to corporate accounts and the like.
No, Musk's griping comes from his need to blame others for his own screwups.
The whole ploy about demanding figures that are impossible to generate, let alone validate with any degree of confidence is about him being able to walk back the deal without paying the penalty for it.
Like his mate Trump, for Musk it's always someone else's fault.
Oh no, not "golden payday".
The Twitter board is desperate to avoid jail time for lying to the SEC all these many years. Because that is an obvious move for Musk, if the Twitter board don't get their house in order.
Moreover, if the advertisers agree that Twitter is not 95% real people, they will start demanding cuts in the advertising rates. And Twitter's (already dismal) income vanishes.
So either they release the data, or go to jail while Twitter itself dries up and blows away, leaving Mush free to build whatever he wants instead. [and maybe he has already built something .... ]
From the Twitter 2021 Annual Report:
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.
Twitter made it clear that they "applied significant judgment" and that the numbers could be higher. Either Musk did not bother to read the report or in his rush to save "freedom" decided to ignore the weasel words. Either way I think he is on the hook to pay penalties or complete the deal.
It's an embarrassing amount of money to have to pay for acting like an arrogant jerk.
Emerald Boy should have done his homework before slapping the money down, but as he didn't bother this is now going to clog up the courts for years if he thinks his flimsy excuses will get him off the hook for the dosh. And good luck to him ever raising any money again from the markets if he goes that way.
If he finds the Twitter board has indeed lied about the user base, then he will not have to pay anything. He has to pay if he walks away from a company that has presented a valid prospectus. If the prospectus is materially false then he doesn't pay a cent. This is the same for any type of purchase whether its car, a house or a company.
But if the prospectus does contain falsehoods that are material then $1bn is not going to be the most pressing concern of the board as Uncle Sam will be paying a visit because lying to the SEC is a criminal offence.
Uncle Sam will be paying a visit because lying to the SEC is a criminal offence
Yup, but I don't think it'll be the Twitter board that would have to face the SEC, this could end up being another strike for Musk who seems to think that rules are only for other people.
In big business like this, there will have been initial discussions. At some point, they will have reached the "to go any further, we need a contract in place - especially non-disclosure agreements". My guess is that the "less than 5% bots" claim came during the early discussions, but when the agreements were signed that would allow detailed discussions the questions started creeping out of the woodwork.
The current phase IS doing what you call "your homework". But it's looking a bit like the teacher was economical with the truth before you signed for your homework pack.
But this talk of a $1b walk away penalty - I can't help wondering how Twitter could enforce that if it were proved that they lied in order to get the initial agreement in place ?
Elon already signed the contract - without doing due diligence. He specifically waived due diligence. He signed and broke the non-disclosure agreement. This is not a normal or even sane big business deal. This is epic scale Dunning Kruger: Musk thinks his ability to sell electric cars and launch rockets means he is better at contract law than Twitter's (and his own) contract lawyers.
Twitter's bot percentage figure is based on a published methodology. The method is reasonable and for all I know was carried out properly. The sample size was low so the resulting figure is not 5±1%, but more like 5% x or ÷ 2. A larger study will probably arrive at a different number but will not be evidence that Twitter lied, only that an inaccurate number was honestly reported. If 5% is demonstrably the wrong number it still does not matter because Musk waived due diligence.
"Twitter's bot percentage figure is based on a published methodology"
So are ISP "unlimited data" accounts that get throttled when they pass a threshold - or more prosaically, user counts that include people who've been DEAD for years
Just because it's "published" doesn't make it ethical or "right"
>> I can't help wondering how Twitter could enforce that if it were proved that they lied in order to get the initial agreement in place ?
By banning Elon, and adding in a bunch of word to a blacklist, like Tesla, SpaceX, BoringCompany. Neuralink, OpenAI, etc.
His little ego wouldn't be able to handle not being allowed to unleash his brain farts onto his salivating neckbeard fanbois.
>My guess is that the "less than 5% bots" claim came during the early discussions
Worse, it's in Twitter's financial reports.
So all the poor innocent shareholders, including his muskiness, were all misled by the evil corporation and amid wailing and gnashing of teeth the price will drop and he can buy it for much less than it was worth when he made the offer.
His only downside is the drop in the value of the 9% he bought up front.
Their downside is that unless they can convince a court that they believed, and it was reasonable to believe, the 5% - then they go to club fed.
I have read as of yesterday June 9, 2022 that Twitter has at a minimum 20% bots not the 5% Twitter admitted to in their SEC filing.
I am sure Musk sees Twitter as too hot to handle. A 15% mistake in the filing with the SEC will attract an independent audit that Twitter will have no control over. Wouldn't it be delicious if Twitter board members and company executives have to hand over passports in the course of an audit.
Musk will want no part of that.
$1B is nothing compared to the specific performance clause. If Musk walks away from the deal for any "due diligence" reason (that he signed away) he has to make Twitter investors whole for the money they have "lost" from not being able to sell their stock at $52.40. The obvious way to do that is to sell Tesla stock which will trash its value even faster than it is currently falling.
If you want to evade the consequences of securities fraud on that scale even being Attorney General of Texas will not save you.
Musk probably acted as his own attorney, because no attorney would advise their client to make a $44 billion offer with a specific performance clause while waiving due diligence.
He can afford it, but I would love it if he tried to back out of the deal and ended up having to pay $10 billion to Twitter's shareholders. Anything to take that massive ego down a peg or two would be lovely to see!
I find it odd that Musk, merely by being the richest man, inspires hate in so many commentators, here and elsewhere. Perhaps its jealousy for having achieved so much through thirty years of his own efforts. (Cue loud bleating about 'other people's efforts too')
An example of a famous hater: Elizabeth Warren’s Facebook ad campaign against Musk is a great example of this. Senator Warren took out several Facebook ads that positioned Elon Musk as an enemy with the only way to solve the problem is by you giving her $10.
I don't have a problem with him because he's rich, I have a problem with him because he's an egomaniacal tool. And I believed that long before the whole Twitter deal, and wouldn't mind in the least if his attempt to buy Twitter resulted in Twitter becoming the next Myspace whether he owns it or it remains publicly traded.
Warren Buffett is rich, and I don't have any criticism of him. Bill Gates is rich, and while there's certainly plenty to criticize about how he got rich, I don't have any criticism of his actions in recent years (I'm not dumb enough to believe the vaccine conspiracy stuff)
The problem is that he's demanding something that was not contractually agreed. That's kinda the whole idea of due diligence: you get that data beforehand because you can't go whining afterwards - which is exactly what he is trying to do regardless because he seems to think rules don't apply to him.
He is welcome not to pay a penny, but not only will he end up in court for the next few years with Twitter, the Tesla shareholders are most likely going for damages too..
He won't pay a penny if Twitter don't hand over the data he's requested
That's not true AT ALL. Where do you get such a dumb idea?
He waived due diligence, he can't back out of the deal because they refuse to give him information he needs to perform due diligence.
If he backs out he will not only owe the $1 billion penalty specified in the deal, Twitter will be able to sue him for specific performance - to essentially make up the difference between the share price he was going to buy them out at and the share price Twitter settles when he backs out. A court would probably not enforce the full amount (which could be $20+ billion) but I could see them make him fork over $10 billion or more.
As mentioned, Tesla shareholders would be able to go after him too, as to the extent his reputation is tarnished, the huge share price premium Tesla stock has traded at for years will diminish and cause them great harm. That share price premium is based on belief by enough market participants that Musk will eventually pull a rabbit out of his hat and make Autopilot work, and/or be able to beat the world's automakers and take a model T like share (or at least iPhone like share) of the market.
If it can be proven that more than 5% of Twitter accounts are dud (and I would be amazed if they weren't) then surely the value of advertising on Twitter (/Facebook/name-a-"social"-platform) nosedives ?
Or to be more precise, why am I paying $x to reach x% of a real audience when it should be $x/(100-fakes)% or something ?
Also I suspect that Twitters heyday is long gone. It has nowhere to grow, and a lot of ground to lose to the Next Big Thing.
The definition of "bot" is not black and white.
I used to own a bar/restaurant, which had a Facebook and a Twitter account and the menu advise customers to "like us on Facebook and follow us on Twitter" like many such places do. My GM was responsible for posting updates to social media, about upcoming events, specials, new menu items or whatever.
To save time from posting the same thing twice, my GM found a service that would copy posts from Facebook onto Twitter automatically.
So is that a bot, since it wasn't a real person posting on Twitter? Or is that just a way of saving time, because obviously it would not be a bot if my GM took an extra minute to login to Twitter and type the same thing in over again?
I know what Musk would say, because he's trying to inflate the number of bots he can point to hoping to sleaze out of the deal he made.
"If it can be proven that more than 5% of Twitter accounts are dud (and I would be amazed if they weren't) then surely the value of advertising on Twitter (/Facebook/name-a-"social"-platform) nosedives ?"
There will probably be detailed and onerous arguments and discussion over the number of "5%". IIRC, the sample size was only about 100 accounts and the variation is something like +/-2, the number of "bot" accounts is between 3% and 7%. my feeling is that it most certainly greater than 5%. I can't imagine why Twitter seem incapable of producing a more accurate figure from a much larger sample size. It's not like they don't have access to the data. It's almost as if they went for the small sample size to deliberately muddy the waters.
We're not happy and we're not sad
We're not crazy but we must be mad
There's snakes at the bottom, snakes at the top
And the ladders all shake and the ladders all rock
And everywhere I look I see
a thousand other fools like me
All clamped down on bended knee
with their eyes shut tight but their hands are free
And everyone is fighting blind
Slashing, biting, wasting time
Up to the bottom and down to the top
Where snakes and ladders never stop
And no one asks the question why
We exist by getting by
We keep playing this crazy game
Where snakes and ladders are all the same
But the man at the top has built a stash
A thin white line of other's cash
But all he sees is blue and green
There are no colours in between
We're the puppets, we're the fools
We're the product, we're the tools
Kick us off, knock us down
Keep us spinning round and round
But I'm a cynic, hypocrite
And I rub my own face in it
And I keep playing this crazy game
Where snakes and ladders are all the same
Not quite. I think it pretty much boils down what each party deems "accurate" and as far as I can tell, Musk is demanding something that is simply impossible to achieve in order to undo the deal.
Personally, I hope it doesn't work because that will only encourage the man child to do this again. And again.
Musk waived due diligence on a deal he entered into carrying the belief that the total number of bot accounts is much greater than 5% of the monetizable user base. One of his expressed goals in acquiring Twitter was to reduce the number of bots.
Musk is now saying that because Twitter claims the number of bots is less than he believed them to be, Twitter must prove that to be true or he walks, because he was misled.
It wasn’t a claim of 5% that led him to sign the deal. It had no material bearing on his thinking - quite the opposite, in fact.
In other words, Musk had a belief, he waived due diligence to investigate that belief, and now he’s saying that unless Twitter proves his belief to be untrue, he accurately (+/-) fooled himself into a purchase and therefore isn’t obligated to see it through.