Elon Musk threatens in court letter to terminate Twitter contract over ‘spam and phoney accounts’

The billionaire asserts that far more than 20 percent of Twitter accounts may be “fake/spam” and that his offer to acquire the company is contingent on Twitter’s reports being accurate.

The billionaire, who claims to devote less than 5 percent of his time to the $44 billion acquisition, has made several critical remarks about Twitter and its management team in recent weeks.

In a letter addressed to the US Securities and Exchange Commission on Monday, Mr. Musk warns that he may “terminate” the acquisition because Twitter is in “clear material breach” of the acquisition agreement.

Last month, he stated that the acquisition was temporarily on hold because he wanted to confirm the company’s claims that less than 5 percent of user-profiles were not run by actual humans.

He then voiced his support for obtaining a bid discount proportional to the proportion of users who are spam bots.

The letter submitted by Mr. Musk’s legal team states that Twitter has “refused to supply Mr. Musk with the information he has consistently asked since May 9, 2022, to evaluate spam and phony accounts on the company’s platform.”

The letter reads, “Mr. Musk feels the corporation is deliberately opposing and undermining his information rights (and the company’s related obligations) under the merger agreement.”

This is a clear significant breach of Twitter’s duties under the merger agreement, and Mr. Musk reserves all rights deriving therefrom, including the right to not complete the transaction and the right to cancel the merger agreement.

So, what exactly is the disagreement about?

Mr. Musk has asserted that far more than 20% of Twitter accounts may be “fake/spam” and stated that his offer to acquire the firm was contingent on Twitter’s reports being accurate.

He criticized Twitter CEO Parag Agrawal for publicly refusing to “provide proof” that less than 5% of accounts were “fake/spam” and noted that he was “worried that Twitter has a disincentive to eliminate spam, as it affects the number of perceived daily users.”

Mr. Agrawal had authored a 15-post thread refuting this motive and saying that Twitter aggressively strives to eliminate spam accounts by suspending over 500,000 spam accounts each day and locking millions of accounts per week that fail human verification checks.

The chief executive failed to point out that if Mr. Musk is to earn a discount on his offer proportional to the amount of “fake/spam” user accounts, then Mr. Musk has an incentive to exaggerate this statistic.

Musk responded with a feces emoji and a question “So how do marketers determine the value of their investment? This is essential to Twitter’s financial stability.”

Mr. Musk suggested that users conduct their tests to determine whether or not accounts were authentic, despite Twitter’s warning that external observers couldn’t determine whether an account was operated authentically by a human, was automated, or as part of a platform manipulation campaign.

In an official blog post, the firm stated, “Every month, we permanently ban millions of automated or spammy accounts before they ever reach a user’s timeline or search results.

This, however, captures two distinct types of phony accounts, one of which is a bot – a wholly automated account – that is not prohibited on Twitter, as well as bogus accounts created to manipulate the network.

The bot account @pentametron, for example, seeks to automatically recognize and retweet any tweets written in iambic pentameter. It is a bot, but it is transparently such and not “fake.”

“The difficult aspect is that many accounts that outwardly appear to be phony are controlled by genuine individuals,” warned Mr. Agrawal, saying that just because an account has a platform-generated handle and profile image does not mean that it is not operated by a real person.

“And some of the spam accounts that are the most destructive – and cause the greatest damage to our users – might appear completely legitimate,” he continued.

Twitter had previously detected and terminated over 23,000 bogus accounts managed by genuine people affiliated with the Chinese Communist Party as part of a propaganda network.

Mr. Musk appears to be using the issue to compel a reduction in the agreed-upon price for the buyout, with Twitter’s stock price suffering as the dispute plays out in public.

In a statement filed with the SEC last week, the firm indicated that it would not reconsider the $44 billion price. The statement read, “Twitter is committed to completing the transaction on the agreed price and terms as quickly as possible.”

Monday, Mr. Musk stated at a conference in Miami: “You cannot pay the same price for something that is significantly inferior to what was advertised. The more inquiries I ask, the greater my worries become.

“They assert that their system is so intricate that only they can comprehend it… It cannot be a profound mystery that is, for example, more complicated than the human soul.”

Mr. Agrawal said: “Our estimate is derived by repeated human assessments (in replicate) of thousands of accounts that are picked at random, consistently over time, from accounts that we consider to be [daily active users]. We perform this quarterly and have done so for many years.

“Based on the technique stated above, our actual internal projections for the previous four quarters were all significantly below 5 percent. The error margins on our estimates provide us with confidence in our quarterly public announcements “he added.

The letter of legal argument asserts: “As the prospective owner of Twitter, Mr. Musk is entitled to the sought information to plan for the business’s transition to his own and to aid his transaction finance.

“To achieve both, he must have a thorough and accurate grasp of Twitter’s active user base,” the letter continues.

“Mr. Musk is not obligated to justify his motivation for obtaining the data, nor is he required to accept the new conditions the firm has attempted to put on his contractual entitlement to the requested data.

“At this point, Mr. Musk believes Twitter is transparently refusing to comply with its obligations under the merger agreement, which is causing further suspicion that the company is withholding the requested data for fear of what Mr. Musk’s analysis of that data will reveal,” the report continues.