[LawTalkingGuy]

The price he quoted was for how Twitter billed itself - # of users, in compliance with the FTC, etc. As it becomes clear that they aren't all that their value naturally goes down.

It would be wrong if Musk tried to get out of the purchase simply because the market has moved since his offer but that's not what happened. This is Twitter's malfeasance, they reported untrue things (and failed to report other true thing) to the SEC and therefore to stockholders.

What ride, except fact-checking their statements, did he take them on? And to be fair, didn't they put themselves on that ride in the first place?

[_djo_]

Well, no, because there's still no evidence that Twitter has lied in any of its filings, and because Musk intentionally waived due diligence which is the traditional way for a purchasing company to verify the actual state of the company it is buying.

If, and only if, it turns out that Mudge's claims cause FTC action that would be severe enough to be defined as a material adverse effect, Musk may have some grounds to back out or reduce the price. But that's not yet clear.

Remember, Twitter didn't want to be purchased. This was a hostile takeover, achieved by Musk going to Twitter's shareholders with an offer attractive enough that they were not going to refuse, forcing the board into accepting the offer. He then signed a binding offer and in his haste to force the deal waived due diligence.

[LawTalkingGuy]

There is no proof, sure. The whistleblower's report is fairly compelling evidence.

Twitter is its shareholders, not its managers.

I imagine it's the lawsuits that this will spawn which will justify backing out or significantly reducing the price. Users whose data was not properly kept, users whose governments (and maybe others) got to spy on them, ad buyers who were promised a certain number and class of viewers, shareholders upset about these things, etc.

[_djo_]

The bar required by the courts to justify backing out from or substantially altering a binding offer is quite rightly a high one, and the possibility of lawsuits alone will probably not be sufficient.

There's no indication that ad buyers were misled, because neither Musk nor Mudge have shown any evidence that Twitter's mDAU claim or method in its FTC filings was either falsely stated or intentionally wrong.

[LawTalkingGuy]

It's likely to be different considering those lawsuits will be about their misrepresentations.

And yes, there are many indications that ad-buyers were defrauded, like the absolute lack of security and bad-account detection and that twitter probably doesn't have the ability to tell who is real or not. And management was incentivized to increase their numbers regardless of concerns. It's not proven but if you'd spent a few hundred million with them it'd definitely be worth a million to try to claw it back.

It's not like Musk needs to prove any specific thing, he just has to shake them up and see what, like the whistleblower report, falls out, and then let the market apply the lawsuits etc.

My guess is that the actual sale-breaking event will be employee sabotage. In my experience Twitter employees hate their own management just less than they hate Elon. If Twitters security is as lax as represented it wouldn't be hard.

[_djo_]

Again, Twitter’s disclaimer around mDAUs is a broad one and nothing stated so far by either Musk or Mudge provides any reliable evidence of that being materially false or misleading.

Ad buyers can’t claim to have been defrauded because the total number of bots on the platform, or even the proportion of bots to real people, are not of relevance to them. All that matters is the mDAU and the reporting they’re getting on ad effectiveness.

As long as mDAU is reasonably accurate and Twitter’s ad support tools are reflecting of that they have no case. Mudge was in a senior enough role that he shouldn’t be mixing up mDAU with the overall bot management question.

Musk does actually need to prove a specific thing: That something Twitter did or intentionally did not do represents a material adverse event sufficient to break the terms of the binding agreement he signed to buy it. That is, again, a high bar and so far nothing that’s emerged in this whole stupid saga has met it.

He’s trying to do the due diligence he should’ve done before signing that offer, but that’s not how the law works.

[LawTalkingGuy]

Ad buyers can claim to be defrauded because of anything. Welcome to the USA. You're saying there's no reason any of them could sue. That's clearly wrong. You think none of them would win. I doubt that as well. But assuredly they could cause havoc with distractions, subpoenas, and huge losses of public good-will, and giving Musk a reason to petition for delay, etc.

Nothing said by Mudge directly implicates the number claimed, but everything else about his report is a massive indictment of their ability to properly report on it and their honest desire to do so. I imagine their constant reclassification of mDAU applicable-users won't help them here. If their actual numbers were 10% high, because of an accounting error or whatever, then you'd likely be right that it wouldn't be enough to break the deal. But if they misrepresented, or tried to avoid relevant data about, the numbers this very likely would be a deal breaker. If you can prove they lied about one thing you can safely assume they're willing to lie about more.

As for the value of Twitter, the perceived value plummeted when they were revealed to not have decent test/release procedures, fragile DCs, a CEO who hides from data, no privacy controls or logging of dev activity in prod, etc. There are a lot of things other than the mDAU numbers that are materially changing the industry's view about, and thus the reasonable value of, Twitter.