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General Category => General Comments => Topic started by: LetterRip on July 12, 2022, 10:29:42 PM

Title: Musk and Twitter
Post by: LetterRip on July 12, 2022, 10:29:42 PM
Reading the lawsuit and the acquisition agreement, I don't see how Musk will get out of being forced to purchase Twitter at the 54.20 price.

Here is the lawsuit for those interested,

https://cdn.arstechnica.net/wp-content/uploads/2022/07/twitter-lawsuit-against-musk.pdf

I simply can't believe the terms he agreed to.

Someone suggested that given he signed on 4/20 - that he might well have been high.
Title: Re: Musk and Twitter
Post by: TheDrake on July 12, 2022, 10:32:18 PM
He might have been. He might not have to go through with the acquisition, but he'll still have to pay the billion dollar breakup.
Title: Re: Musk and Twitter
Post by: Wayward Son on July 12, 2022, 11:17:35 PM
Naw.  He'll negotiate it down to a few hundred-million, and Twitter will agree to save court costs and court time.  ;D
Title: Re: Musk and Twitter
Post by: TheDrake on July 13, 2022, 08:33:53 AM
He will not be able to do that. Twitter's board - their hands are tied by fiduciary duty. Nothing will be in the stockholders interest compared to forcing the deal through. If they tried to let Musk off the hook, they'd get sued by the stockholders. Not to mention being stockholders themselves, they have little incentive to break off. This Delaware court moves pretty quickly from what I understand, so it won't be years worth of legal fees only months.
Title: Re: Musk and Twitter
Post by: LetterRip on July 13, 2022, 10:10:34 AM
He might have been. He might not have to go through with the acquisition, but he'll still have to pay the billion dollar breakup.

The billion dollars is only if the DoJ or other entity prevented the merger on anti-competitive grounds or similar.  It is not set up so he could unilaterally 'walk away' and only pay a billion.

The contract has language along the lines of 'compelled specific performance' and 'parties agree than monetary damages would be insufficient'.

The term 'material breach' and other circumstances where it could be terminated are extremely narrowly defined as well.


As to a negotiated settlement - I could see maybe something in the 10 billion range. about half way between the agreed on price and the stock price.  As said though, both parties specifically declaimed that monetary damages would be insufficient.  Any proposed settlement would be voted on by current shareholders to go through so as to avoid the board being sued.

That said - there really is no motivation for Twitter to settle for anything less than the full amount - either the complete difference between the offered price and the current share price and then Musk has no shares;  or Musk pays the full amount and acquires the company.  Their position is absurdly strong and it will be in front of a Delaware Judge chancery court - which means no jury to bamboozle or baffle with BS.  The contract is very clear cut that Musk has a specific performance obligation and that Musk has repeatedly breached the terms of the contract.  Also Musk has repeatedly tweeted stuff extremely damaging to his case.
Title: Re: Musk and Twitter
Post by: Fenring on July 13, 2022, 10:46:04 AM
I think you are all discounting Musk's own objection, which is that Twitter was claiming a false number of real accounts. Note that in the case of most companies the financials and their accuracy are going to be the key issue. But Twitter insiders have already admitted that Twitter doesn't even try to turn a profit, nor could they at present, so it is more than apparent that the sole source of value in the company is the number of actual users. I can see the argument that Musk is just making up excuses to back out. But putting aside his motive for making these comments, if in fact it's true that Twitter has a significantly different number of real users than they announced, I would argue that the real value of the company has been manipulated just as if they had faked lines on their balance sheet. Their user base is their real balance sheet. The platform's only value to anyone is amount of people reached, although Musk no doubt had plans to alter that and switch its gears so that it would become profitable. But based on its current business model, lying or being negligent about the number of real users should in fact alter its material value, and in a company of that size transparency about users is as crucial as transparency about depreciation and amortization would be to a real estate or infrastructure company.

I'm not a corporate lawyer so I have no idea how these types of things are deliberated on in court, but in a sense purely of 'fairness', it's evident to me that if Twitter's user base is off by a significant % (not sure what that would be, 10% or more?) then that should allow for a change of bid price after the fact and a new stockholder vote (assuming one had already happened). It would be up to a judge to decide not only whether the contract is binding on Musk in principle, but also whether Twitter is already in breach of it for publishing misleading information.
Title: Re: Musk and Twitter
Post by: TheDrake on July 13, 2022, 11:29:34 AM
But Musk never included due diligence on the number of users. He waived that, as I understand it. He failed to take adequate time to satisfy himself that his valuation was correct. If there's something in the paperwork Twitter provided that was a factual misrepresentation, then maybe he's got a point. But if it is just that their estimate is disputed, like Musk prefers a different formula, then I don't think that's the case. I'm no lawyer either, but most of the legal experts weighing in believe this to be the case.
Title: Re: Musk and Twitter
Post by: LetterRip on July 13, 2022, 11:38:05 AM
See this analysis by Professor Bainbridge (author of a widely used Mergers and Acquisitions analysis book) for the various approaches Musk might take to get out of the agreement, and why they are unlikely to be successful, including the bot claim,

https://www.professorbainbridge.com/professorbainbridgecom/2022/06/is-elon-musk-trying-to-get-out-of-the-twitter-deal-probably-will-he-be-able-to-do-so-with-impunity-p.html

Note that the judge most likely to get the case is the head of the chancery court, a judge who forced specific performance in a different merger case (ie the acquiring company was forced to go through with the purchase).
Title: Re: Musk and Twitter
Post by: Seriati on July 13, 2022, 12:13:15 PM
It's hard to reach conclusions from just the complaint, and I don't have time to really dig in.  One thing I've thought for a while is that Musk may have wanted to be sued to be forced to finish the deal.  It's a weird backwards - purely speculative - idea that I have, but given the left's hostility to this deal it always seemed probable to me that a regulator would try and step in to prevent the takeover (or at least to delay it until after the election).  Causing the Board to sue Musk to finish the deal undercuts any rationale to do so, and would result in a regulatory intervention being to "save" Musk.  Pretty much, everyone on the left is now screaming that Musk should be forced to close - instead of doing everything in their power to stop the close.

The complaint alone though isn't super helpful, you have to see the answer to see what the Board didn't include.  I was just flipping through it and it's already apparent that it was drafted more as a public disclosure than a legal complaint at places (or the lawyers involved are not very smart).  I mean look at paragraphs 71 and 72, where the Board is expressing that it can't understand why after a meeting with the bankers additional items on the estimation of accounts showed up.  Any lawyer that's ever done any deal knows why that happened.  The bank is lending against the value of the assets, the bank will conduct its own diligence on what those assets really are, fake accounts being greater than disclosed impairs the lending base value (and reduces the loan).  Interestingly, while the Board asserts repeatedly that there is a lack of a diligence condition, they brush over Twitters obligations in respect of facilitating the lending.  What they avoid detailing there, honestly could undercut their case completely.  You can see that Musk was making these arguments throughout - take a look at paragraph 103 where the Board acts like it was out of the blue.

If you want to see open stupidity or misrepresentations take a look 74 and 75 and the following sections.  The Board disputes Musk's claim that Twitter based it's estimate of Spam bots on a random sample of 100 accounts.  They clearly point out that they use a random sample of 9,000 accounts per quarter.  Wait for it...  How many days in a quarter?  Right 90, 9000 accounts over 90 days, equals 100 accounts per day.  Hmm...  Given this is a manual process, it very well could be around (or even exactly) 100 accounts a day.  Whose correct?  If its the Board, why not 36,000 accounts for the "whole year"?  Even later at 78, when Agrawal defended Twitter note the language used: "“multiple human reviews (in replicate) for thousands of accounts, that are sampled at random, consistently over time..."  Isn't that literally admitting that it's going to equate to around 100 a day (if not, it wouldn't be "consistently over time").

Remember though, Delaware is a very tough court to unwind a deal for many of the "publicly" stated reasons so far.  If the answer doesn't show something powerful, it may be that Musk loses and is forced to buy Twitter (or does he win when that happens?).
Title: Re: Musk and Twitter
Post by: LetterRip on July 13, 2022, 01:00:16 PM
It's hard to reach conclusions from just the complaint, and I don't have time to really dig in.  One thing I've thought for a while is that Musk may have wanted to be sued to be forced to finish the deal.

He got into the deal when his Tesla stock price around it's ultimate peak, it has since declined about 40% in value.  He was going to borrow against his shares to acquire Twitter.  If he is forced to sell off a bunch more TSLA stock, the price could drop drastically more. Also he is now getting competitive pressure from other companies starting to sell electric vehicles; and there is now good competition from MobileEye and Cruise for FSD (previously there weren't any decent competitors for self-driving available to consumers - as opposed to WayMo targeting commercial drivers).  So a lot of his competitive advantages for Tesla have been lost.  Also a lot of his planned growth has been stymied by the pandemic supply chain problems which has allowed other companies R&D to catch up.  He still has advantages in drivetrain, battery, and charging stations.

If SpaceX gets Super Heavy flying and deploying satellites, then spinning off StarLink could add another 100 billion dollar valuation company.

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The complaint alone though isn't super helpful, you have to see the answer to see what the Board didn't include.  I was just flipping through it and it's already apparent that it was drafted more as a public disclosure than a legal complaint at places (or the lawyers involved are not very smart).  I mean look at paragraphs 71 and 72, where the Board is expressing that it can't understand why after a meeting with the bankers additional items on the estimation of accounts showed up.  Any lawyer that's ever done any deal knows why that happened.  The bank is lending against the value of the assets, the bank will conduct its own diligence on what those assets really are, fake accounts being greater than disclosed impairs the lending base value (and reduces the loan).  Interestingly, while the Board asserts repeatedly that there is a lack of a diligence condition, they brush over Twitters obligations in respect of facilitating the lending.  What they avoid detailing there, honestly could undercut their case completely.  You can see that Musk was making these arguments throughout - take a look at paragraph 103 where the Board acts like it was out of the blue.

Twitter's obligations are very narrow under the contract.

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If you want to see open stupidity or misrepresentations take a look 74 and 75 and the following sections.  The Board disputes Musk's claim that Twitter based it's estimate of Spam bots on a random sample of 100 accounts.  They clearly point out that they use a random sample of 9,000 accounts per quarter.  Wait for it...  How many days in a quarter?  Right 90, 9000 accounts over 90 days, equals 100 accounts per day.  Hmm...  Given this is a manual process, it very well could be around (or even exactly) 100 accounts a day.  Whose correct?  If its the Board, why not 36,000 accounts for the "whole year"?  Even later at 78, when Agrawal defended Twitter note the language used: "“multiple human reviews (in replicate) for thousands of accounts, that are sampled at random, consistently over time..."  Isn't that literally admitting that it's going to equate to around 100 a day (if not, it wouldn't be "consistently over time").

The reason is because they publish quarterly estimates, not annual estimates.  So 9000 is correct for the quarterly estimate.  They aren't doing 'daily estimates' the 100 is a daily sample, but they don't do their estimates based on a single sample.  So Musk's statement is a misrepresentation.  Also you can calculate their margin of error using a sample size of 9000

https://www.calculator.net/sample-size-calculator.html

For a sample of 9000, with a 99% confidence, and an actual rate of 5%, they have a margin of error of .59%.

Assuming the Judge takes any effort at all to understand statistics, Twitter should be entirely in the clear.  (Note that Twitter is using monetized users in their SEC filings, which is the number relevant to advertisers - what percentage of ads are being served to bots).

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Remember though, Delaware is a very tough court to unwind a deal for many of the "publicly" stated reasons so far.  If the answer doesn't show something powerful, it may be that Musk loses and is forced to buy Twitter (or does he win when that happens?).

Yep, we shall see what happens.
Title: Re: Musk and Twitter
Post by: TheDrake on July 13, 2022, 09:48:21 PM
anybody want to lay odds against a charity of your choice? I'll match reasonable bets.
Title: Re: Musk and Twitter
Post by: Seriati on July 14, 2022, 10:43:21 AM
He got into the deal when his Tesla stock price around it's ultimate peak, it has since declined about 40% in value.

So what?  Honestly, even if the Board wins, the Court may not grant them relief.  Accordingly to several sources (I haven't verified), the parties to the contract are 2 companies that Musk controls.  It would be extraordinary for the Court to order them to close the deal, and if came to damages, it may be that Twitter doesn't actually have any (Twitter's stock price is damage to the shareholders not Twitter, and it may be the case that the contract doesn't include the clause that would allow Shareholder damages to be considered), it may be that they don't even get the billion if the deal fails.

The rest of your "economic" arguments are not really relevant.

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Twitter's obligations are very narrow under the contract.

Did you read the contract?

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The reason is because they publish quarterly estimates, not annual estimates.  So 9000 is correct for the quarterly estimate.  They aren't doing 'daily estimates' the 100 is a daily sample, but they don't do their estimates based on a single sample.  So Musk's statement is a misrepresentation.  Also you can calculate their margin of error using a sample size of 9000

Lol, you ignored the point.  There's no way that its a "winner" to claim that Musk misrepresented what they are doing if they are in fact randomly sampling 100 accounts a day.  They may have more success pushing that it was a violation of the NDA to disclose it.

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For a sample of 9000, with a 99% confidence, and an actual rate of 5%, they have a margin of error of .59%.

They do if this was a simple and well constructed study.  They may or may not in reality have anything with any real validity at all (even assuming they get good data out of the reviews).  The fact that you express so much certainty means you're either repeating their claims (which have not been independently verified) or misrepresenting your own knowledge.  Can you confirm which it is that you're doing?

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Assuming the Judge takes any effort at all to understand statistics, Twitter should be entirely in the clear.  (Note that Twitter is using monetized users in their SEC filings, which is the number relevant to advertisers - what percentage of ads are being served to bots).

This is one of those unwavering (and unjustified) faith in academic expert situations for you isn't it?  Reality is that in court they do usually take the time to understand the statistics, but they also take the time to understand the study and the good or bad decisions that went into it.  That's exactly why I pointed out that 100 per day versus 9000 a quarter is sophistry.
Title: Re: Musk and Twitter
Post by: Tom on July 14, 2022, 11:37:55 AM
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That's exactly why I pointed out that 100 per day versus 9000 a quarter is sophistry.
I don't have a horse in this race, but I need to point out that there is in fact a meaningful statistical difference between sampling 100 user accounts a day and sampling 9000 user accounts per quarter.
Title: Re: Musk and Twitter
Post by: Fenring on July 14, 2022, 12:05:04 PM
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That's exactly why I pointed out that 100 per day versus 9000 a quarter is sophistry.
I don't have a horse in this race, but I need to point out that there is in fact a meaningful statistical difference between sampling 100 user accounts a day and sampling 9000 user accounts per quarter.

Wouldn't this skew the argument in Musk's favor? If he agreed with Twitter to look at a random sampling to satisfy his demand to know the % of bots, a mere 100 accounts in a given day could be way off the statistical average if that day's sampling is all they showed him in detail. And in fact his Tweet on the fly that day seems to indicate that he was shocked they were only going to look at 100 accounts with him. Him naming the number of 100 is the only so-called violation of the NDA, which is pretty silly, since that number would be materially relevant to the validity of whether they had done their legal due diligence. Whether he should have announced it on Twitter (ironically) is one thing, but the idea that this should be kept secret is pretty ridiculous on its face. Even if 100 random accounts sampled per day was their normal regimen, in the case of a sale they should obviously have seriously ramped up the number for Musk's benefit and for that of the banks. I personally wouldn't trust Twitter's own internal accounting of bot accounts; it really is needed in the case of a sale to have Musk and possibly others present to directly observe this analysis of the accounts.
Title: Re: Musk and Twitter
Post by: Tom on July 14, 2022, 12:11:46 PM
My understanding is that they gave him access to the enterprise advertising API, which locks down the sample size and runs per day. Had he run once a day for a month, he could have obtained the same info they (apparently) use.
Title: Re: Musk and Twitter
Post by: Fenring on July 14, 2022, 12:23:27 PM
My understanding is that they gave him access to the enterprise advertising API, which locks down the sample size and runs per day. Had he run once a day for a month, he could have obtained the same info they (apparently) use.

I assume he didn't want to take a month or more to collect his data? I dunno.
Title: Re: Musk and Twitter
Post by: LetterRip on July 14, 2022, 01:00:19 PM
He had a complete month of firehose data (every tweet, like, share, etc. for every user for a particular month),

by default the query number is limited for all users, and he was given the standard enterprise limit.  When he complained they immediately raised the limit.  Musk's team must have been doing something weird though because the basic enterprise query limit is quite high.

He didn't have access to certain user private data so he can't fully replicate their methodology because they use private IP addresses and other information for helping to determine bots.

Apparently their methodology is a sample of 9000 per quarter, 100 samples per day.
Title: Re: Musk and Twitter
Post by: LetterRip on July 14, 2022, 01:15:21 PM
He got into the deal when his Tesla stock price around it's ultimate peak, it has since declined about 40% in value.

So what?  Honestly, even if the Board wins, the Court may not grant them relief.

He agreed to specific performance, which is what they are asking for.  Rumors are that it will be the head judge of chancery court, a judge which previously has enforced specific performance.

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Accordingly to several sources (I haven't verified), the parties to the contract are 2 companies that Musk controls.

He created two companies X holdings or such.

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It would be extraordinary for the Court to order them to close the deal, and if came to damages, it may be that Twitter doesn't actually have any (Twitter's stock price is damage to the shareholders not Twitter, and it may be the case that the contract doesn't include the clause that would allow Shareholder damages to be considered), it may be that they don't even get the billion if the deal fails.

They aren't asking for damages, they are asking for specific performance, which Musk agreed to as a term of the deal.

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Did you read the contract?

Yes, and I've read expert opinions on it.  I wouldn't count on my personal interpretation since I'm well aware I can overlook things.

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Lol, you ignored the point.  There's no way that its a "winner" to claim that Musk misrepresented what they are doing if they are in fact randomly sampling 100 accounts a day.  They may have more success pushing that it was a violation of the NDA to disclose it.

It is a material misrepresentation and a breach of contract.

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They do if this was a simple and well constructed study.  They may or may not in reality have anything with any real validity at all (even assuming they get good data out of the reviews).  The fact that you express so much certainty means you're either repeating their claims (which have not been independently verified) or misrepresenting your own knowledge.  Can you confirm which it is that you're doing?

I'm assuming they have competent people.  It may be they have incompetent or corrupt individuals.  My point was mostly that 100 per day is plenty to get accurate and meaningful results, when they are aggregating the 100 daily samples  into a 9000 sample for a quarterly result.

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This is one of those unwavering (and unjustified) faith in academic expert situations for you isn't it?  Reality is that in court they do usually take the time to understand the statistics, but they also take the time to understand the study and the good or bad decisions that went into it.  That's exactly why I pointed out that 100 per day versus 9000 a quarter is sophistry.

It isn't sophistry - it is a very important distinction.  Sample size of 100 would have a large variance, sample size of 9000 has very little variance.
Title: Re: Musk and Twitter
Post by: LetterRip on July 14, 2022, 01:22:01 PM
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That's exactly why I pointed out that 100 per day versus 9000 a quarter is sophistry.
I don't have a horse in this race, but I need to point out that there is in fact a meaningful statistical difference between sampling 100 user accounts a day and sampling 9000 user accounts per quarter.

There isn't if they use time stratified sampling without replacement and allow any accounts that were banned in the time period to be selected.  They could take the complete sample on the last day and get the same results (either truncating the sample so that they aren't forward looking; or using forward looking for the old samples).  It takes a little bit of effort to ensure the same result but it is fairly straight forward.
Title: Re: Musk and Twitter
Post by: LetterRip on July 14, 2022, 01:26:29 PM
From the filing,

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Musk had bumped up against was not the result of throttling but a default 100,000-per-month limit on the number of queries that could be conducted. With his undisclosed team of data reviewers working behind the scenes, Musk had hit that limit within about two weeks. Twitter immediately agreed to, and did, raise the monthly search query limit one hundred-fold, to 10 million — more than 100 times what most paying Twitter customers would get.
Title: Re: Musk and Twitter
Post by: yossarian22c on July 14, 2022, 03:49:24 PM
Meh, I hope Musk wins, I don't care if he gets charged a billion break up fee or whatever. His proposed moderation changes aren't good for society. Twitter is bad enough for real dialogue and discussion as is, filtering out or flagging the worst of the crap is the least they can do.
Title: Re: Musk and Twitter
Post by: Fenring on July 14, 2022, 04:01:53 PM
Meh, I hope Musk wins, I don't care if he gets charged a billion break up fee or whatever. His proposed moderation changes aren't good for society. Twitter is bad enough for real dialogue and discussion as is, filtering out or flagging the worst of the crap is the least they can do.

Hm, I think a lot of people have this idea that he wants to turn Twitter into Qanon or something. But what I think he actually wants to do is create much more hands-on self-moderating of content. Basically the unload the censorship choices onto the individual user. This could in theory create greater echo chambers, to be fair, if people use this feature and shunt out even more content for themselves than Twitter already does. But it would also allow some voices to be present for whatever niche audience they have. As with anything this process would have to be tested in practice.
Title: Re: Musk and Twitter
Post by: NobleHunter on July 14, 2022, 04:12:12 PM
Social media platforms seem to converge on a fairly similar set of moderation policies. There are just rules you need to have if you want millions of people to use your service and also sell ad space. From Musk's earlier musing, he seemed to be in the process of discovering why everyone tends to adopt the same rules. If he does get forced to buy and then gets involved as he wanted to originally, I suspect he would make a bunch of changes that go horribly wrong before having to reverse course and put implement something fairly close to the current set of rules.
Title: Re: Musk and Twitter
Post by: Seriati on July 14, 2022, 04:19:40 PM
Wouldn't this skew the argument in Musk's favor? If he agreed with Twitter to look at a random sampling to satisfy his demand to know the % of bots, a mere 100 accounts in a given day could be way off the statistical average if that day's sampling is all they showed him in detail.

Musk's claim was that he'd look at 100 because that was what Twitter did when it calculated it's statistics.  It wouldn't shock me at all to find that in explaining how they grabbed their "9000 per quarter" for study if they didn't actually take 100 per day and if they didn't tell him that during the meeting where they explained it to him.  Honestly, if the process is ongoing, and it has to be for compliance purposes, it almost certainly has been run as investigations of 100 (or so) samples a day and then the results are aggregated at the end of the quarter (and probably real time on a weekly or monthly basis as well).

My point is that it was presented in the complaint in a manner that's not going to hold up in court.  It's a sign of the document focusing on the public rather than the lawsuit.

His accessing of the firehouse data has nothing to do with this issue.  That was a different part of the complaint.  Effectively, Twitter didn't send him the data, they set him up as an advertiser and let him run the queries that an advertiser would have been able to run (by the way, that's either completely scary that anyone paying for access can get this data or completely undercuts the claim that they granted him detailed access).  Advertisers are capped on the queries they can run, which makes sense because the queries are for them to better develop targeted ads and better engagement, not for them to do compliance checks or diligence checks on Twitter.

Again though, that's the kind of thing that will not fool a court.  They'll actually hear arguments about whether the data access was really open or had material limits that impaired the ability to use it for the purpose it was purported to be shared.

Title: Re: Musk and Twitter
Post by: Seriati on July 14, 2022, 04:21:25 PM
He had a complete month of firehose data (every tweet, like, share, etc. for every user for a particular month),by default the query number is limited for all users, and he was given the standard enterprise limit.  When he complained they immediately raised the limit.  Musk's team must have been doing something weird though because the basic enterprise query limit is quite high.

High for an advertiser, low for a buyer.  In a standard deal he would have had unlimited "Twitter" insider, type access.  Not third party client access.
Title: Re: Musk and Twitter
Post by: Tom on July 14, 2022, 04:46:27 PM
I would be astonished to learn that Twitter makes unlimited queries against live data available to its data analysis team. That is a very poor practice.
Title: Re: Musk and Twitter
Post by: Seriati on July 14, 2022, 04:51:52 PM
He agreed to specific performance, which is what they are asking for.  Rumors are that it will be the head judge of chancery court, a judge which previously has enforced specific performance.

There's a good treatment of this in the WSJ.  I have no dog in the fight, but they make a convincing argument that it's unlikely the court will order specific performance.  It's effectively unenforceable if they do order it (assuming this isn't want Musk actually wants).  Courts never want to issue orders that can be ignored.

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They aren't asking for damages, they are asking for specific performance, which Musk agreed to as a term of the deal.

So what?  Specific performance appears in the vast majority of deals, still an extremely rare remedy and almost never provided for something this complex. 

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Did you read the contract?

Yes, and I've read expert opinions on it.  I wouldn't count on my personal interpretation since I'm well aware I can overlook things.

That's helpful to know, thanks.

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Lol, you ignored the point.  There's no way that its a "winner" to claim that Musk misrepresented what they are doing if they are in fact randomly sampling 100 accounts a day.  They may have more success pushing that it was a violation of the NDA to disclose it.

It is a material misrepresentation and a breach of contract.

Not sure what you mean.  There's no way its material under any legal theory of materiality.  It could be a breach of an NDA obligation or a non-disparagement clause (but not both at once), but that's about it.

It's also funny to argue that it's a material misrepresentation in a case that may turn on whether Twitter's 5% claim is a material misrepresentation.  The claim about 100 accounts is light years away in magnitude from the 5% claim, and it's very likely the court would hold that the 5% isn't material even if it turns out to be very wrong (and possibly even if the Twitter board had reason to know it was wrong).

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They do if this was a simple and well constructed study.  They may or may not in reality have anything with any real validity at all (even assuming they get good data out of the reviews).  The fact that you express so much certainty means you're either repeating their claims (which have not been independently verified) or misrepresenting your own knowledge.  Can you confirm which it is that you're doing?

I'm assuming they have competent people.  It may be they have incompetent or corrupt individuals.  My point was mostly that 100 per day is plenty to get accurate and meaningful results, when they are aggregating the 100 daily samples  into a 9000 sample for a quarterly result.

My point is you missed the point.  Corporate compliance is not designed to be an academic study.  There's virtually no chance that it doesn't have material issues in design and implementation that make the conclusions suspect and that invalidate the degree of certainty.

I wasn't even including the risks associated with corruption.  In reality though there's a real possibility that the "manual process," which this part is (as opposed to the automatic process that Twitter claims scrubs over a million accounts a day), generates bad date before it even feeds into the model.  Please don't forget how often individuals falsify results (sometimes for nefarious reasons, sometimes because they don't want to do the work), misinterpret conclusions or just do a poor job.  These compliance officers are paid to generate a confirmation of the 5% claim, not to rock the boat, and there are certainly strong incentives on them to get the "right" answer.

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It isn't sophistry - it is a very important distinction.  Sample size of 100 would have a large variance, sample size of 9000 has very little variance.

I get the basic principal there but the devil is in the details.  If it's a daily sample, then it's really a sample size of 100 repeated 90 times.  Depending on how the sample is drawn, like for example from all active accounts versus newly created accounts, it could introduce or hide a whole lot issues.  If it's pulling all 9000 at once (which seems unlikely) then how it's doing it is still a question.

It really doesn't matter though, the point is not whether there's enough of a sample being taken (the sample size is adequate for a study - the real questions are more likely to be about whether the data is valid), the point is whether referring to the sample as 100 - assuming for the moment that they actually take 90 samples of 100 - is incorrect.  There's no way that it would be and honestly there's no way that a judge would conclude it was.
Title: Re: Musk and Twitter
Post by: LetterRip on July 14, 2022, 05:42:39 PM
The WSJ opinion is from individuals without expertise in the relevant law, neither of them practice in M&A, nor does Professor M. Todd Henderson teach law that overlaps with M&A (either presently or in the past).

I' wouldn't give their opinions any more weight than any other lawyer talking outside their area of expertise and in this case they are both way outside their areas of expertise.

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Not sure what you mean.  There's no way its material under any legal theory of materiality.  It could be a breach of an NDA obligation or a non-disparagement clause (but not both at once), but that's about it.

Yes material was wrong choice of word, I meant a 'seriously misleading' representation.

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It's also funny to argue that it's a material misrepresentation in a case that may turn on whether Twitter's 5% claim is a material misrepresentation.  The claim about 100 accounts is light years away in magnitude from the 5% claim, and it's very likely the court would hold that the 5% isn't material even if it turns out to be very wrong (and possibly even if the Twitter board had reason to know it was wrong).

Agreed.

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So what?  Specific performance appears in the vast majority of deals, still an extremely rare remedy and almost never provided for something this complex.

I don't think it is particularly complex, as deals and contracts go this one doesn't seem that high on the complexity - just lots of money.  Musk's statements are strongly indicative that he is looking for a pretextual way to exit the deal and he suddenly developed cold feet after his Tesla stock valuation crashed.

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My point is you missed the point.  Corporate compliance is not designed to be an academic study.  There's virtually no chance that it doesn't have material issues in design and implementation that make the conclusions suspect and that invalidate the degree of certainty.

Sure, but material adverse effect in Delaware courts is an absurdly high bar.  I don't think it will be possible for him to clear that bar.

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I get the basic principal there but the devil is in the details.  If it's a daily sample, then it's really a sample size of 100 repeated 90 times.

No it is an aggregated sample.  As I described to Tom they could get the exact same sample all at once.  If they are using 9000 samples for the analysis, then the sample size is 9000.  The fact that they have stratified them over time is immaterial to the analysis.  There isn't a good reason to not do uniform sampling over time, and may well be a benefit.  The other major benefit to doing it daily is that they appear to use labor intensive analysis for each sample, so they can assign one or two analysts and have them work daily; rather than putting 180 analysts on it at the end of each quarter; or do the pull on the last quarters data and have each report be lagged by an additional quarter.
Title: Re: Musk and Twitter
Post by: LetterRip on July 15, 2022, 02:13:06 PM
I think this is interesting,

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McCormick's April 2021 ruling in that case, available on the court's website, centered on a specific performance clause in the purchase contract—similar to the clause that Twitter is citing in its attempt to force Musk to complete his $44 billion purchase. "Chalking up a victory for deal certainty, this post-trial decision resolves all issues in favor of the seller and orders the buyers to close on the purchase agreement," McCormick wrote in the ruling.

"The buyers lost their appetite for the deal shortly after signing it, as government entities issued stay-at-home orders around the country and DecoPac's weekly sales declined precipitously... Rather than use reasonable best efforts to work toward a definitive credit agreement, the buyers called their litigation counsel and began evaluating ways to get out of the deal," McCormick's ruling noted.

[...]

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We talked on Monday about the realistic outcomes: The judge will let Musk off the hook for $1 billion (or less), or the judge will order him to close the deal and buy Twitter, or Musk and Twitter will settle for him buying Twitter at a lower price, or they’ll settle for him walking away at a higher price. The last of these seems the best to me — Twitter’s shareholders are compensated, Musk is held to his word, he doesn’t actually own Twitter — but it requires Musk to agree to settle. And to get him to settle, I do think Twitter needs to convince him that they will otherwise get specific performance and make him close the deal. Nobody wants that, I don’t think (I hope!), but they have to fight for it anyway.

https://arstechnica.com/tech-policy/2022/07/judge-in-musk-twitter-case-forced-a-company-to-complete-a-merger-last-year/
Title: Re: Musk and Twitter
Post by: LetterRip on July 15, 2022, 05:26:23 PM
A response to the WaPo article by Professor Bainbridge (he is freind and frequent coauthor with one of the WaPo article authors),

https://www.professorbainbridge.com/professorbainbridgecom/2022/07/does-twitters-lawsuit-against-elon-musk-really-look-like-a-loser.html
Title: Re: Musk and Twitter
Post by: LetterRip on July 18, 2022, 06:11:41 PM
Filing by Musk's lawyers,

https://corpgov.law.harvard.edu/2022/07/18/twitter-vs-musk-musks-opposition-to-expedited-proceedings/
Title: Re: Musk and Twitter
Post by: Fenring on July 18, 2022, 07:21:10 PM
Filing by Musk's lawyers,

https://corpgov.law.harvard.edu/2022/07/18/twitter-vs-musk-musks-opposition-to-expedited-proceedings/

As I suggested above, the entire matter, according to the defense, rests on the facts of the bot/spam accounts. Whether a judge agrees that this is materially relevant remains to be seen, but I agree with the general sentiment of the defense regarding both the timeline and the details of what they are stating. It accords with what Musk was claiming on Twitter right after the deal was accepted.

I'd also like to note that the difference in language between the plaintiffs and Musk's team is quite striking. I'm not a lawyer so I can't tell how normal or abnormal it is, but I appreciate as a layperson that the defense's reasoning is worded in plain English, often with colorful but clear descriptors like "warp speed", which makes their arguments easily readable.
Title: Re: Musk and Twitter
Post by: Tom on July 18, 2022, 07:41:01 PM
I don't have a facepalm big enough.
Title: Re: Musk and Twitter
Post by: Fenring on July 18, 2022, 08:09:01 PM
I don't have a facepalm big enough.

Perhaps you can find someone with extra-large hands so that your entire face can be capture in the smack?
Title: Re: Musk and Twitter
Post by: LetterRip on July 18, 2022, 08:34:30 PM
Here is the termination filing, so it preceded the filing by Twitter,

https://www.sec.gov/Archives/edgar/data/1418091/000110465922078413/tm2220599d1_ex99-p.htm
Title: Re: Musk and Twitter
Post by: TheDrake on July 18, 2022, 11:55:02 PM
My layperson take on this is this.

This is why rational investors perform due diligence. By waiving it, Musk was basically saying "I trust the numbers you've given me."

Now he's trying to run an audit to prove it was a stolen acquisition. But he has no proof that the bot count isn't exactly what they said it was.
Title: Re: Musk and Twitter
Post by: Fenring on July 19, 2022, 12:47:32 AM
This is why rational investors perform due diligence. By waiving it, Musk was basically saying "I trust the numbers you've given me."

Now he's trying to run an audit to prove it was a stolen acquisition. But he has no proof that the bot count isn't exactly what they said it was.

I'm not really sure where I stand on this, if anywhere (I don't care as much as it may seem). But just to follow your reasoning, let's say Musk had in fact tried to do this due diligence before making a hard offer - how do you think that plays out? My thinking is Twitter gives Musk the same data it was giving everyone, and if he asks for more info or direct personal access to investigate the accounts himself, they refuse just as they would to anyone else. How else would he gain insider access to see for himself unless he had already put his foot in the door as a buyer? To be fair they did offer him a board seat first, so potentially he could have accepted it, and from within the board tried to get the board to agree to produce better data. But that process would likely be long, and even then he could potentially be overruled.
Title: Re: Musk and Twitter
Post by: jc44 on July 19, 2022, 05:53:36 AM
This is why rational investors perform due diligence. By waiving it, Musk was basically saying "I trust the numbers you've given me."

Now he's trying to run an audit to prove it was a stolen acquisition. But he has no proof that the bot count isn't exactly what they said it was.

I'm not really sure where I stand on this, if anywhere (I don't care as much as it may seem). But just to follow your reasoning, let's say Musk had in fact tried to do this due diligence before making a hard offer - how do you think that plays out? My thinking is Twitter gives Musk the same data it was giving everyone, and if he asks for more info or direct personal access to investigate the accounts himself, they refuse just as they would to anyone else. How else would he gain insider access to see for himself unless he had already put his foot in the door as a buyer? To be fair they did offer him a board seat first, so potentially he could have accepted it, and from within the board tried to get the board to agree to produce better data. But that process would likely be long, and even then he could potentially be overruled.
My laymans (and possibly flawed) understanding is that normally you write an offer letter that goes something along the line of "we offer X billion $ for the company subject to due diligence not showing anything unexpected", Musk wrote one that went "I offer Y billion $ for the company and I want it so much/quickly that I'll skip due diligence". The due diligence process does entitle you to poke through the books at a deeper level that the public normally gets to see and would have got him to the current point where he could pull out without having made any unfortunate commitments.
Title: Re: Musk and Twitter
Post by: TheDrake on July 19, 2022, 09:55:17 AM
This is why rational investors perform due diligence. By waiving it, Musk was basically saying "I trust the numbers you've given me."

Now he's trying to run an audit to prove it was a stolen acquisition. But he has no proof that the bot count isn't exactly what they said it was.

I'm not really sure where I stand on this, if anywhere (I don't care as much as it may seem). But just to follow your reasoning, let's say Musk had in fact tried to do this due diligence before making a hard offer - how do you think that plays out? My thinking is Twitter gives Musk the same data it was giving everyone, and if he asks for more info or direct personal access to investigate the accounts himself, they refuse just as they would to anyone else. How else would he gain insider access to see for himself unless he had already put his foot in the door as a buyer? To be fair they did offer him a board seat first, so potentially he could have accepted it, and from within the board tried to get the board to agree to produce better data. But that process would likely be long, and even then he could potentially be overruled.

Let's assume first that he was unsatisfied or unconvinced with what he was shown, as opposed to using it as an excuse when Tesla and Twitter tanked. Part of the due diligence could be to enumerate the type of data he wants (the full user list with IPs, samples, what have you). That is definitely not uncommon.  Let's say they stonewall him, with or without an explicit request for data in contractual form. Then he walks away without penalty. Happens all the time.

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"Mr Musk did not ask to enter into a confidentiality agreement or seek from Twitter any non-public info regarding Twitter," Twitter said in its proxy statement.

So he only started to care when it looked like he could no longer afford the deal. I hate fraud and deceit, so my only investment in this is that Musk make it right after completely screwing up Twitter for investors and employees.
Title: Re: Musk and Twitter
Post by: Fenring on July 19, 2022, 10:51:14 AM
Let's say they stonewall him, with or without an explicit request for data in contractual form. Then he walks away without penalty. Happens all the time.

Right, except that it wasn't exactly a strict business investment, more like a moral investment. I believe him when he said he wanted it so that he could free up narrative control (in his view). So walking away would defeat the purpose of trying to reform it. So let's take this scenario as an hypothesis: what would be the best method to ensure he both gets Twitter and gets the info he needs? Yes, he could do a slower process, and they could stonewall him, and they effectively keep him out. Note that they did initially want to keep him out and were risking reneging on their duty to the shareholders when they wanted to reject his offer out of hand. So his situation was not just trying to buy a company, but also trying to wrest it away by force from people he viewed as bad actors. From that standpoint the cautious and slow approach would surely fail, no? Not sure if he actually had other options that could succeed other than getting his foot in the door in a big way.

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So he only started to care when it looked like he could no longer afford the deal. I hate fraud and deceit, so my only investment in this is that Musk make it right after completely screwing up Twitter for investors and employees.

That is definitely plausible, but it's hard for me to tell. The fact of tech stocks tanking immediately after he made the offer makes it very hard to suss out his internal reasoning. Media tried to make it sound like it was his antics tanking Tesla and Twitter, but since all tech was tanking at the same time I find that claim dubious.
Title: Re: Musk and Twitter
Post by: jc44 on July 19, 2022, 11:26:59 AM
Right, except that it wasn't exactly a strict business investment, more like a moral investment.
Given that his reasons for pulling out are pure business ones it doesn't seem like his morals had a lot of fibre. You can't reasonably argue that he didn't know that Twitter had bots, he's complained about it often enough.
Title: Re: Musk and Twitter
Post by: TheDrake on July 19, 2022, 11:53:20 AM
Right, except that it wasn't exactly a strict business investment, more like a moral investment.
Given that his reasons for pulling out are pure business ones it doesn't seem like his morals had a lot of fibre. You can't reasonably argue that he didn't know that Twitter had bots, he's complained about it often enough.

Exactly. He's making a business case that it was overvalued. Well, what's his value on his moral crusade? It's certainly true that people have paid more than market value based on less than solid business decisions. If your crusade is "I must have control of twitter, and I'm not going to haggle or try to determine value" Then don't back out. Pay the price you agreed to and create your 8chan utopia.

It's like trying to buy the ark of the covenant and then complaining that there wasn't as much gold as you thought.
Title: Re: Musk and Twitter
Post by: Fenring on July 19, 2022, 12:03:19 PM
I can see that argument. But I can also see the argument that changing a price after the fact when new info is discovered showing the original value was due to misrepresentations is also plausible. It's hard to know what was in Musk's mind, maybe it was just low moral fibre as you say. It certainly does look like he wanted to renegotiate when stocks were tanking. Maybe the bots thing was a fake excuse; or maybe it was legit and coincidentally came at the same time as stocks tanking. That conflicted fact timing is why I'm willing to say it's hard to suss out.
Title: Re: Musk and Twitter
Post by: LetterRip on July 19, 2022, 01:36:20 PM
His case is for breach of contract (failure to furnish the information necessary for calculating mDAU) and that the SEC filings on mDAU are sufficiently wrong to qualify as material and thus material company adverse events.

Whether the case is sincere or he is making a pretextual case because he wants to break the contract due TSLA stock devaluation is unclear.
Title: Re: Musk and Twitter
Post by: LetterRip on July 19, 2022, 03:39:00 PM
It is pretty amazing to me how many people can't divorce their analysis of the legal issues from their personal like or dislike of Elon.  (Not in this thread but elsewhere on the internet).

It is like betting on a boxer to win or lose based on your liking them.  It is an approach to things I just can't fathom.
Title: Re: Musk and Twitter
Post by: NobleHunter on July 19, 2022, 04:39:01 PM
It is strongly tempting to dismiss Musk's arguments because he's an idiot (for certain values of idiot). I mean, if you assume his mDAU complaint is being made in bad faith, why waste more mental energy?

Though I'm not purporting to offer serious legal analysis, so maybe you have a point.
Title: Re: Musk and Twitter
Post by: TheDrake on July 19, 2022, 05:18:53 PM
It is pretty amazing to me how many people can't divorce their analysis of the legal issues from their personal like or dislike of Elon.  (Not in this thread but elsewhere on the internet).

It is like betting on a boxer to win or lose based on your liking them.  It is an approach to things I just can't fathom.

I definitely find it hard to try to keep it separate. I try to visualize, what if person X did this? But he really has no peers that would have made this kind of rash acquisition attempt, IMO. So the cognitive dissonance doesn't allow me to fully look at the facts of the case in full isolation. I try to rely on what experts are saying about it, but I can't be sure they don't just dislike Musk as much as I do.
Title: Re: Musk and Twitter
Post by: LetterRip on July 19, 2022, 06:37:20 PM
I try to rely on what experts are saying about it, but I can't be sure they don't just dislike Musk as much as I do.

I've found them a very much mixed bag for experts.  Sometimes they'll do spot on analysis for a significant part, and then they'll do some speculation and conclusions that are completely unwarranted.  Sometimes they appear to lack a basis for most of their claims.

Even the professor I linked to above, while the majority of his analysis seems excellent, has some sections where his conclusions seem to go well beyond the evidence.
Title: Re: Musk and Twitter
Post by: rightleft22 on July 20, 2022, 10:32:38 AM
It is pretty amazing to me how many people can't divorce their analysis of the legal issues from their personal like or dislike of Elon.  (Not in this thread but elsewhere on the internet).

It is like betting on a boxer to win or lose based on your liking them.  It is an approach to things I just can't fathom.

I definitely find it hard to try to keep it separate. I try to visualize, what if person X did this? But he really has no peers that would have made this kind of rash acquisition attempt, IMO. So the cognitive dissonance doesn't allow me to fully look at the facts of the case in full isolation. I try to rely on what experts are saying about it, but I can't be sure they don't just dislike Musk as much as I do.

I've never understood the draw of Twitter, why anyone would invest time let alone money in it? different strokes for different folks...
Maybe its all connected, taking joy in pulling down those that succeeded, companies and individuals in ways we admire and also dislike as it reveals our own lack.

Personally I wonder why so many people are so invested in thier legal/personal opinion on the matter. I can't think of a time when my opinion changed anything other then my own experience, usually to the negative. 
Before twitter I think we all understood that at some level, and if we didn't our platform to share that was limited.  After twitter we have the platform and everyone thinks that what they have to say, even if they have no knowledge about what they are talking about, must matter.
Title: Re: Musk and Twitter
Post by: Tom on July 20, 2022, 11:18:44 AM
I enjoy twitter quite a bit, and believe I have had my mind changed and have changed minds through conversation (although not on twitter, because I don't engage in long conversations there.)
Title: Re: Musk and Twitter
Post by: TheDrake on July 20, 2022, 01:50:00 PM
Twitter is great for finding out that a thing happened in real time. A politician's statement. A goal being scored. A financial shift. A personal scandal. A supreme court decision. A celebrity out on a date. It is terrible for understanding anything about that thing. I also love following the stream of any team that is losing a game.
Title: Re: Musk and Twitter
Post by: Fenring on July 20, 2022, 02:16:43 PM
I only joined Twitter a few weeks ago, and it was for the exclusive purpose of following the thoughts of a few select individuals. Some of them also blog, one did not, so to follow that one person I had to be on Twitter. Most of the posts from any of these people include links to longer articles, so really the tweets are just a clearinghouse to post more in-depth material. I don't follow anyone whose content is exclusively found in the tweet itself.
Title: Re: Musk and Twitter
Post by: Seriati on July 20, 2022, 02:51:29 PM
The WSJ opinion is from individuals without expertise in the relevant law, neither of them practice in M&A, nor does Professor M. Todd Henderson teach law that overlaps with M&A (either presently or in the past).

I' wouldn't give their opinions any more weight than any other lawyer talking outside their area of expertise and in this case they are both way outside their areas of expertise.

I didn't ask you to give their opinions weight.  I said they make a convincing case, and notwithstanding your dismissal of their credentials, I'm perfectly capable of evaluating what they said based on the merits.  Reality is that a court has a lot of discretion in how they apply remedies, but it would be unlikely to successfully order this deal competed by specific performance (unless that's what Musk secretly wants). 

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I don't think it is particularly complex, as deals and contracts go this one doesn't seem that high on the complexity - just lots of money.

Lol.  Honestly, I'm really laughing about this.  There is no such thing as a "non-complex" acquisition of a multi-billion dollar company.  There are thousands of points to still be negotiated and agreed, and thousands (if not millions) of relationships and contracts that have to be evaluated and assigned.  Is the court going to sit in and order resolution of every single thing that's outstanding?  There is almost certainly thousands of hours of legal work to be done here, and at least 3-5 times as much non-legal work.  For context, the last M&A I saw the details on (a fairly friendly one), had more than 15 attorneys on one side (with 2 different firms), plus in-house attorneys and the "othersides" inhouse and outside counsel.     Of those 15 at least 8 had over 200 hours billed on the deal, and for the 3 primary in-house attorneys it was effective their full time job for more than a month and part time for several other months.

All of that work is guided by the business judgements of the parties.

Is the court going to babysit that and put a thumb on the scale?  How exactly are they going to do it?

Nope, specific performance is for discrete actions that the court can manage, not for an order to work on a transaction of this magnitude.  The correct answer here is breach of contract, and Twitter's recovery will be limited to damages.  Unless they can establish a harm (which is debatable), and that the harm can not be made whole with money but only by the acquisition of the company, they really have no chance of specific performance.  Even if they could establish such a harm, the inclusion of a liquidated damages provision undercuts the argument that only specific performance will cure that harm (that provision is a literal admission of the parties both that the contract can be breached and that money damages can be adequate recompense).

I personally think the WSJ's argument on the non-enforcement of the liquidated damages' clause was too dismissive.  While it's arguable that Twitter can't show material damages, there are enough nebulous things outstanding that could be damage that there will be a hook to defend the liquidated damages.

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Musk's statements are strongly indicative that he is looking for a pretextual way to exit the deal and he suddenly developed cold feet after his Tesla stock valuation crashed.

Are they really "strongly indicative"?  I think that's your own view.  Musk's comments also seem to reflect his honest opinion that spam bots comprise a much higher percentage of the accounts in question than Twitter reports.  Or do you somehow disbelieve him on that point?

Maybe phrase it another way, what percentage of Spambots would allow Musk out of the deal?  It can't be that it's immaterial where there is a representation made by Twitter in it's Securities Law filings (which are public) and that representation (along with all others) was incorporated by reference into the agreements.  Honestly, if you can't set that point you're not being rational, and if you can set it, you're admitting that Musk could have a valid objection.

Now it could be that Musk is wrong about the rate of Spambots, but neither you nor I are remotely in a position to make that conclusion.

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My point is you missed the point.  Corporate compliance is not designed to be an academic study.  There's virtually no chance that it doesn't have material issues in design and implementation that make the conclusions suspect and that invalidate the degree of certainty.

Sure, but material adverse effect in Delaware courts is an absurdly high bar.  I don't think it will be possible for him to clear that bar.

That's a cogent argument and you probably have a point.  Though the most likely remedy is still damages not specific performance.

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I get the basic principal there but the devil is in the details.  If it's a daily sample, then it's really a sample size of 100 repeated 90 times.

No it is an aggregated sample.  As I described to Tom they could get the exact same sample all at once.  If they are using 9000 samples for the analysis, then the sample size is 9000.  The fact that they have stratified them over time is immaterial to the analysis.  There isn't a good reason to not do uniform sampling over time, and may well be a benefit.  The other major benefit to doing it daily is that they appear to use labor intensive analysis for each sample, so they can assign one or two analysts and have them work daily; rather than putting 180 analysts on it at the end of each quarter; or do the pull on the last quarters data and have each report be lagged by an additional quarter.

I'm bored with arguing this irrelevancy.  Whether you agree or not, do you understand that Twitter could have in fact presented this to Musk in their meetings as a sample of roughly 100 accounts pulled each day?

It literally doesn't matter if you're 100% correct about how the study is run, a court is not going punish Musk for citing to samples of 100 if that's approximately the size of the daily sample.  They'd have to argue in court that he didn't provide enough context to make it clear that the 9000 samples were run quarterly (which by the way is almost certainly not the way it actually occurs - I guarantee you there is a daily statistic generated, whether just for that day or on some kind of rolling basis, is immaterial) for the 5% reporting threshold.  But then, Musk could point out that they didn't in fact disclose this in their 10Q.   

Here's what they said in the most recent 10Q:

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We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 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.

So just looking at what they said, is it still absolutely certain in your mind that it's a 9000 data point sample run quarterly?  They flat out say that the 5% number is based on the "average ... in the samples during each monthly analysis period during the quarter."  That implies not only that each quarter is actually 3 monthly periods, but also based on the reference to the average in a monthly period that each month is actually an aggregation of some sub-unit being tested.  So quite literally, what Musk said could actually be true and this language would not be inconsistent with that, however, what you think the Twitter board is saying about a quarterly study would actually be inconsistent with the claims they made here.
Title: Re: Musk and Twitter
Post by: Seriati on July 20, 2022, 03:24:58 PM
My layperson take on this is this.

This is why rational investors perform due diligence. By waiving it, Musk was basically saying "I trust the numbers you've given me."

It's really not clear that this is correct, or rather that its the whole story.  Read the termination notice that LetterRip linked to.  Musk's team is arguing that they included a right to rely on the accuracy of Twitter's public filings for the execution (which is in lieu of conducting diligence before hand, but is premised on those filings being accurate), and that they included information rights in the merger contract to allow them to verify those filings.  Musk claimed - before Twitter brought suit - that Twitter had breached the agreement, if that's true, then this is a breach of contract action and the Board's argument about due diligence is an irrelevant red herring.

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Now he's trying to run an audit to prove it was a stolen acquisition. But he has no proof that the bot count isn't exactly what they said it was.

It's also not clear that the latter statement is true.  Again, in Musk's public filing on the termination, they pretty much state that even though Twitter has delayed at every turn and failed to turn over complete data sets, that the initial indications of Musk's data scientists are that Twitter's bot count could be "wildly" erroneous.
Title: Re: Musk and Twitter
Post by: Seriati on July 20, 2022, 03:34:54 PM
My laymans (and possibly flawed) understanding is that normally you write an offer letter that goes something along the line of "we offer X billion $ for the company subject to due diligence not showing anything unexpected", Musk wrote one that went "I offer Y billion $ for the company and I want it so much/quickly that I'll skip due diligence". The due diligence process does entitle you to poke through the books at a deeper level that the public normally gets to see and would have got him to the current point where he could pull out without having made any unfortunate commitments.

I think in this case, it's more like Musk understood that the Board was actively hostile to his acquisition of the Company and that they would never have provided him with the due diligence in advance of the agreement.  So instead, he signed a deal saying that he would close on the transaction - if Twitter's public statements were accurate - and that provided him with certain rights to Twitter's information to verify those statements.  His lawyers repeatedly cited the relevant provisions in their letters demanding the information from Twitter.

So instead of saying, I want to see the merchandise before we sign the deal.  Signing the deal saying that payment of the purchase price is subject to your claims about the merchandise being demonstrated. 

Granted, I'm stating that in the light most favorable to Musk, and that may not be the way it actually is drafted or plays out in court.  Certainly Twitter's Board disputes that its a condition of closing the deal, but they may not be correct in how they are interpreting it. 

But there's no reason to believe that either form of that agreement is less effect or to disparage the rights provided in the second form (contract, then verify to close) over the first (verify then contract).  In fact, generally speaking, there is almost always a continuing due diligence component after the signing of an agreement and prior to the closing (though sometimes it just impacts the price ultimately paid).
Title: Re: Musk and Twitter
Post by: Tom on July 20, 2022, 03:35:44 PM
I'm actually too cynical for this conversation, because my own thought process goes "there is no way that a Delaware court is going to let someone back out of a prominent contract of this sort and risk that entire state's economy by appearing to not rule in favor of a corporation."
Title: Re: Musk and Twitter
Post by: LetterRip on July 20, 2022, 03:46:10 PM
The WSJ opinion is from individuals without expertise in the relevant law, neither of them practice in M&A, nor does Professor M. Todd Henderson teach law that overlaps with M&A (either presently or in the past).

I' wouldn't give their opinions any more weight than any other lawyer talking outside their area of expertise and in this case they are both way outside their areas of expertise.

I didn't ask you to give their opinions weight.  I said they make a convincing case, and notwithstanding your dismissal of their credentials, I'm perfectly capable of evaluating what they said based on the merits.

Sorry wasn't implying that you weren't capable of evaluating it on its merits - was just pointing out why those who can't evaluate the arguement on the merits should be cautious.

I find there more recent response to Bainbridges critique somewhat persuasive, especially the '3rd party beneficiary' section, essentially the benefit to 3rd parties is specifically disavowed, with capped damages at 1 billion.  Twitter Inc. isn't harmed by the termination, only the share holders.  So Twitter Inc. would benefit from the 1 billion, but not from specific performance.

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In substance under the merger agreement, Twitter, Inc. is acting as a commission-free broker of a deal where current Twitter, Inc. shareholders agree to have their shares cancelled in return for a payment and Musk’s parent holding company agrees to make that payment in return for  ownership of Twitter’s (one) new share. But rather than make a contract among shareholders and Musk and his holding companies, as a broker would do, Twitter, Inc. made itself the counter party to Musk and his entities. But as a commission-free broker, Twitter, Inc. loses nothing when the deal collapses. In fact, having negotiated a termination fee of $1 billion, Twitter, Inc. is actually better off with breach and that remedy than with either its limited (to $1 billion) damages remedy or specific performance. And shareholders, being nonparties disavowed as third-party beneficiaries, have no separate cause of action. Only by ignoring the legal distinction between Twitter, Inc., the corporation, and Twitter, Inc.’s pre-merger shareholders could specific performance make sense.

https://www.professorbainbridge.com/professorbainbridgecom/2022/07/jb-heaton-and-todd-henderson-respond-they-think-twitters-lawsuit-is-a-loser.html
Title: Re: Musk and Twitter
Post by: LetterRip on July 20, 2022, 04:02:50 PM
Seriati,

I think you make a great case, and while I could definitely argue some points - I'm all argued out (way too much time arguing elsewhere )

That said  I will respond a little :)

The spambots - I have no idea what the courts would find persuasive - that seems a huge unknown to me and seems a complete crap shoot for the CMAE threshold.

As to damages as remedy - I would think the part of the contract that disavows damages would be adequate remedy might lead a court to not do so.
Title: Re: Musk and Twitter
Post by: Seriati on July 20, 2022, 04:03:11 PM
By the way LetterRip, excellent find on the Ars Technica link.  The fact that McCormick has ordered specific performance in a merger before is definitely relevant to the probability she'd do so again. 

I note though, in the article, it points out how this is uncommon ("one of the few judges..") and that the order also resolved all factual questions in favor of the seller.  I suspect that Musk's efforts on the side of getting access to the information and basis for terminating the deal are far less easily shown to be pre-textual than was the case in the prior deal.  I don't think anyone following this, honestly believes that Musk wasn't concerned with SpamBots.  And while a reasonable case can be made that Musk knew (or should have known) that Spambots were more prevalent than Twitter claimed, that doesn't resolve that getting the actual number would be material to the lending, nor that such a finding would cause Twitter to have breached it's representations on the point.

There's also a general concept that prohibits specific performance where the party requesting it has "unclean hands."  If Twitter did make an erroneous claim to the SEC and particularly if that can be demonstrated to have been willful or a result of willful blindness its very hard to see how they would have the clean hands necessary to get that remedy.  Take a look at the article, its hard to imagine that the seller in that case had done anything wrong.
Title: Re: Musk and Twitter
Post by: LetterRip on July 20, 2022, 04:10:55 PM
Seriati,

Quote
I suspect that Musk's efforts on the side of getting access to the information and basis for terminating the deal are far less easily shown to be pre-textual than was the case in the prior deal. I don't think anyone following this honestly believes that Musk wasn't concerned with SpamBots.

I think the biggest point against Musk is that his first query about the mDAU calculation wasn't until Tesla's share price had dropped significantly.  On the other hand, the mDAU query was 4 days (read this somewhere but not sure where) after Twitter's SEC filing restating the prior 12 quarter's mDAU due to double counting (a really basic statistical error).  The restatement was .8% per quarter.  But such a basic statistical error suggests that they were not employing individuals with strong statistical and machine learning skills.

Title: Re: Musk and Twitter
Post by: Tom on July 20, 2022, 04:16:37 PM
Quote
I don't think anyone following this honestly believes that Musk wasn't concerned with SpamBots.
For what it's worth, I don't think Musk has been sincerely concerned about spambots ever, but considers them the complaint that can get the most traction.
Title: Re: Musk and Twitter
Post by: LetterRip on July 21, 2022, 04:17:52 PM
Another interesting argument,

the Specific Performance clause states,

Quote
Section 9.9 Specific Performance.

(a) The parties hereto agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate this Agreement) in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties hereto acknowledge and agree that the parties hereto shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereto agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or injunctions or any other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to show proof of actual damages or provide any bond or other security in connection with any such order or injunction.

(b) Notwithstanding anything herein to the contrary, including the availability of the Parent Termination Fee or other monetary damages, remedy or award, it is hereby acknowledged and agreed that the Company shall be entitled to specific performance or other equitable remedy to enforce Parent and Acquisition Sub’s obligations to cause the Equity Investor to fund the Equity Financing, or to enforce the Equity Investor’s obligation to fund the Equity Financing directly, and to consummate the Closing if and for so long as, (i) all of the conditions set forth in Section 7.1 and Section 7.2 (other than those conditions that are to be satisfied at the Closing; provided, that such conditions are capable of being satisfied if the Closing were to occur at such time) have been satisfied or waived and Parent has failed to consummate the Closing on the date required pursuant to the terms of Section 2.2, (ii) the Debt Financing (or, as applicable, the Alternative Financing) has been funded or will be funded at the Closing if the Equity Financing is funded at the Closing, and (iii) the Company has confirmed that, if specific performance or other equity remedy is granted and the Equity Financing and Debt Financing are funded, then the Closing will occur. For the avoidance of doubt, (A) while the Company may concurrently seek (x) specific performance or other equitable relief, subject to the terms of this Section 9.9, and (y) payment of the Parent Termination Fee or other monetary damages, remedy or award if, as and when required pursuant to this Agreement), under no circumstances shall the Company be permitted or entitled to receive both a grant of specific performance to cause the Equity Financing to be funded, on the one hand, and payment of the Parent Termination Fee or other monetary damages, remedy or award, on the other hand; provided, however, that in no event shall the Company be permitted or entitled to receive aggregate monetary damages in excess of the Parent Termination Fee (except in all cases that Parent shall also be obligated with respect to its expense reimbursement and indemnification obligations contained in Section 6.11 and its applicable obligations under Section 8.3(d)(iii) and Section 8.6(b)).

(c) To the extent any party hereto brings an action, suit or proceeding to specifically enforce the performance of the terms and provisions of this Agreement (other than an action to enforce specifically any provision that expressly survives the termination of this Agreement), the Termination Date shall automatically be extended to (i) the twentieth (20th) Business Day following the resolution of such action, suit or proceeding or (ii) such other time period established by the court presiding over such action, suit or proceeding.

and the filing by Twitter states,

Quote
In Section 9.9(b), the parties expressly “acknowledged and agreed that the Company shall be entitled to specific performance or other equitable remedy to enforce Parent and Acquisition Sub’s obligations to cause the Equity Investor to fund the Equity Financing, or to enforce the Equity Investor’s obligation to fund the Equity Financing directly, and to consummate the Closing” if three conditions are met: (i) all of the conditions set forth in Section 7.1 and Section 7.2 have or will be satisfied at the closing; (ii) the debt financing has been funded or will be
funded at the closing if the equity financing is funded; and (iii) the company has confirmed that the closing will occur.
154. All of the conditions set forth in Sections 7.1 and 7.2 have been satisfied or waived, or are expected to be satisfied or waived at the closing, and the closing will occur if the debt and equity financing are funded, which funding is solely within the control of defendants.
155. Twitter has suffered and will continue to suffer irreparable harm as a result of defendants’ breaches.

In 154 it seems they admit that ii and iii haven't yet been met, so they might not actually have a case for specific performance yet.

The above argument was raised Brandon Ross on Quora.
Title: Re: Musk and Twitter
Post by: LetterRip on August 05, 2022, 06:52:55 PM
Musk's counterclaim, and also Musk's teams response to Twitter's filing

https://s3.documentcloud.org/documents/22127591/musk-public-version-of-counterclaims-answer-w-cos.pdf

Here is Twitter's response to Musk's counterclaim,

https://s22.q4cdn.com/826641620/files/doc_news/2022/08/Twitters-Reply-to-Verified-Counterclaims.pdf

Musk's core arguments are that only 2/3rd of mDAU are served ads, 70% of all mDAU are served almost no ads, 7% are served almost all of the adds, then the remainder are served a moderate number of ads.  In addition it is alleged that Twitter counts spam accounts as part of mDAU until they are eliminated and don't retroactively adjust historical mDAU to remove them.  Twitter also have double counted users.  In addition Musk claims that to prevent Musk from discovering the degree that Twitter has mislead about mDAU they stonewalled and delayed and gave false or incomplete data; were informed that this constituted a breach of contract, and failed to remedy this breach in the 30 day period resulting in termination.

Earlier I would have given Musk a 1 in 10 chance of prevailing, now maybe I'd give him a 2 or 3 in 10 chance if he can prove his allegations.
Title: Re: Musk and Twitter
Post by: LetterRip on August 05, 2022, 07:50:20 PM
In the countersuit, there are allegations made by Musk's team that were not included in the termination notice.  Would Musk be required to have them in the termination notice to be able to pursue them in the countersuit?  Is of major importance that they were not included?
Title: Re: Musk and Twitter
Post by: LetterRip on August 24, 2022, 11:19:32 AM
Major bombshell,

Mudge (a security expert with exemplary credentials and integrity) - who was hired to deal with Twitter cybersecurity issues, and whom was fired in January 2022, has just had parts of his whistleblower complaint made public (the second half is heavily redacted, link below).  I think it dramatically increases the odds of Musk prevailing.  It accuses executives of knowingly and deliberately misleading the FTC, the Twitter Board, and public on security matters (access controls; backups; commit controls) ; and on spam bot problems and user accounts; and claims that Twitter's infrastructure is extremely vulnerable to a collapse of weeks or months and came perilously close to such a collapse.  It especially focuses on the current CEO's role in these deceptions, but also claims the complicity (in some aspects) of one board member with a large number of twitter shares.

https://www.documentcloud.org/documents/22186683-twitter-whistleblower-disclosure
Title: Re: Musk and Twitter
Post by: NobleHunter on August 24, 2022, 11:33:59 AM
Did Musk know any of this? If he didn't, does it matter? It seems like he was trying to kill the deal on the basis of the spam issues, which the summary of the complaint seems to support, but can he now cite the rest of it as a reason to why he shouldn't be forced to follow through?

I want the worst outcome for Musk but I have to concede that lying about the risk of their core service evaporating for months seems like it should qualify as an adverse event.
Title: Re: Musk and Twitter
Post by: LetterRip on August 24, 2022, 11:48:28 AM
Did Musk know any of this? If he didn't, does it matter? It seems like he was trying to kill the deal on the basis of the spam issues, which the summary of the complaint seems to support, but can he now cite the rest of it as a reason to why he shouldn't be forced to follow through?

I want the worst outcome for Musk but I have to concede that lying about the risk of their core service evaporating for months seems like it should qualify as an adverse event.

These likely qualify as Material Adverse Effects. Twitter avered in the Merger agreement that the SEC documents were correct and contained no omissions that would qualify as MAEs. It is unclear if this will be part of the current trial, or if a separate case would have to be filed.  If the allegations are true - I'd think they'd constitute clear evidence of fraud and of fraudulent intent.

Musk likely didn't know much of this - since his filings to date don't address most of the issues raised. I'm unclear if he can make filings on these in the current case, or must do a separate case - I'd be shocked if they can't be raised at all.
Title: Re: Musk and Twitter
Post by: LetterRip on August 24, 2022, 12:31:39 PM
Another aspect that was only tangentially addressed is that it was clear to senior executives that Dorsey was having issues prior to stepping down suggesting he was incapable of managing Twitter - suggesting that medical or mental issues of the previous CEO were not being disclosed to investors and board members.
Title: Re: Musk and Twitter
Post by: TheDrake on August 24, 2022, 04:03:22 PM
I'm interested to see what he can prove. I mean, he didn't blow the whistle then get fired. He got fired and then blew the whistle. He does have a reputation for a certain brand of integrity, as much as a hacker can muster, though he does appear to be a white hat. Many of his complaints do also appear to be corroborated. Most of his complaint was about lax security on user data, not bots and spam.
Title: Re: Musk and Twitter
Post by: Fenring on August 24, 2022, 10:26:08 PM
Musk likely didn't know much of this - since his filings to date don't address most of the issues raised. I'm unclear if he can make filings on these in the current case, or must do a separate case - I'd be shocked if they can't be raised at all.

Since it appears to be Twitter suing Musk, rather than the other way around, wouldn't the likeliest outcome be that they'd just drop the case rather than expose themselves to discovery and records being subpoenaed? A second case wouldn't be required if they just let Musk walk away quietly in order to quiet the blowback on this.
Title: Re: Musk and Twitter
Post by: NobleHunter on August 30, 2022, 09:23:14 AM
https://www.cbc.ca/news/business/musk-whistleblower-complaint-exit-twitter-deal-1.6566404 (https://www.cbc.ca/news/business/musk-whistleblower-complaint-exit-twitter-deal-1.6566404)

Musk is going to at least try to use the whistleblower to justify canceling the deal.
Title: Re: Musk and Twitter
Post by: LetterRip on August 31, 2022, 02:39:53 PM
Musk filed an additional termination notice,

https://www.sec.gov/Archives/edgar/data/0001418091/000110465922095765/tm2224790d1_ex99-q.htm

He is also seeking to amend his counterclaim, but the documents have yet to be disclosed and no ruling issued.
Title: Re: Musk and Twitter
Post by: TheDrake on October 04, 2022, 02:52:28 PM
Musk is going to buy Twitter after all? I didn't see that coming. How to show you're crazy without saying so.
Title: Re: Musk and Twitter
Post by: msquared on October 04, 2022, 04:01:16 PM
So is this basically Musk admitting he will loose the case if it goes to trial?
Title: Re: Musk and Twitter
Post by: LetterRip on October 04, 2022, 05:29:58 PM
Quote
So is this basically Musk admitting he will loose the case if it goes to trial?

Or he is afraid something embarrassing will come out.  Or he has a reason he wants Twitter faster than might occur if it goes to trial.  Or this is a delaying tactic. Or ....
Title: Re: Musk and Twitter
Post by: TheDeamon on October 04, 2022, 05:45:00 PM
Quote
So is this basically Musk admitting he will loose the case if it goes to trial?

Or he is afraid something embarrassing will come out.  Or he has a reason he wants Twitter faster than might occur if it goes to trial.  Or this is a delaying tactic. Or ....
Or another Billionaire (or more) has decided to get involved in the purchase with comparable goals for Twitter. Which means Musk won't be fronting as much of the financial burden.

Once the sale goes through, the current board can't say squat about what he does 5 minutes later, unless they locked something into the contract that prohibits it.
Title: Re: Musk and Twitter
Post by: TheDeamon on October 04, 2022, 05:48:47 PM
Alternate option is a lot of Musk's activities seem to hinge on his financial status at the time. So it could be one of his companies is about to do something that he expects to increase his valuation sufficiently that he doesn't need to sweat it out any longer.
Title: Re: Musk and Twitter
Post by: TheDrake on October 04, 2022, 06:30:47 PM
Maybe he was about to be banned.

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The Tesla Inc (TSLA.O) chief executive suggested that Crimea, which Moscow seized in 2014, be formally recognized as Russia, that water supply to Crimea be assured and that Ukraine remain neutral. He asked Twitter users to vote 'yes' or 'no' on the plan.
Title: Re: Musk and Twitter
Post by: TheDeamon on October 05, 2022, 07:57:22 AM
Maybe he was about to be banned.

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The Tesla Inc (TSLA.O) chief executive suggested that Crimea, which Moscow seized in 2014, be formally recognized as Russia, that water supply to Crimea be assured and that Ukraine remain neutral. He asked Twitter users to vote 'yes' or 'no' on the plan.

1. It was a poll.
2. As he pointed out, it still currently remains a highly probable outcome. Ukraine has a long road to haul before they can even reach Crimea, and Russia is likely to use nukes before it gets to that point.

Speaking objective truths, and posting unpopular polls shouldn't be bannable offenses to most Americans.

I hope Ukraine does get Crimea back, I think they have a chance of doing so. But I think they're going to be reigned in before then by NATO due to the nuclear threat.

Title: Re: Musk and Twitter
Post by: Ouija Nightmare on October 05, 2022, 01:41:51 PM
Quote
So is this basically Musk admitting he will loose the case if it goes to trial?

Or he is afraid something embarrassing will come out.  Or he has a reason he wants Twitter faster than might occur if it goes to trial.  Or this is a delaying tactic. Or ....

Or he simply had a mood swing and wants Twitter today.