Author Topic: Musk and Twitter  (Read 4243 times)

LetterRip

  • Members
    • View Profile
Musk and Twitter
« 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.

TheDrake

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #1 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.

Wayward Son

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #2 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

TheDrake

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #3 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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #4 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.
« Last Edit: July 13, 2022, 10:19:18 AM by LetterRip »

Fenring

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #5 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.

TheDrake

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #6 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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #7 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).
« Last Edit: July 13, 2022, 11:47:39 AM by LetterRip »

Seriati

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #8 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?).

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #9 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.

Quote
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.

Quote
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).

Quote
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.

TheDrake

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #10 on: July 13, 2022, 09:48:21 PM »
anybody want to lay odds against a charity of your choice? I'll match reasonable bets.

Seriati

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #11 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.

Quote
Twitter's obligations are very narrow under the contract.

Did you read the contract?

Quote
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.

Quote
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?

Quote
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.

Tom

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #12 on: July 14, 2022, 11:37:55 AM »
Quote
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.

Fenring

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #13 on: July 14, 2022, 12:05:04 PM »
Quote
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.

Tom

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #14 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.

Fenring

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #15 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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #16 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.
« Last Edit: July 14, 2022, 01:06:13 PM by LetterRip »

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #17 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.

Quote
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.

Quote
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.

Quote
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.

Quote
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.

Quote
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.

Quote
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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #18 on: July 14, 2022, 01:22:01 PM »
Quote
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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #19 on: July 14, 2022, 01:26:29 PM »
From the filing,

Quote
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.

yossarian22c

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #20 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.

Fenring

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #21 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.

NobleHunter

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #22 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.

Seriati

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #23 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.


Seriati

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #24 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.

Tom

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #25 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.

Seriati

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #26 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.

Quote
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. 

Quote
Quote
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.

Quote
Quote
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).

Quote
Quote
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.

Quote
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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #27 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.

Quote
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.

Quote
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.

Quote
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.

Quote
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.

Quote
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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #28 on: July 15, 2022, 02:13:06 PM »
I think this is interesting,

Quote
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.

[...]

Quote
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/

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #29 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

LetterRip

  • Members
    • View Profile

Fenring

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #31 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.

Tom

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #32 on: July 18, 2022, 07:41:01 PM »
I don't have a facepalm big enough.

Fenring

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #33 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?

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #34 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

TheDrake

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #35 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.

Fenring

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #36 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.

jc44

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #37 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.

TheDrake

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #38 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.

Quote
"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.

Fenring

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #39 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.

Quote
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.

jc44

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #40 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.

TheDrake

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #41 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.

Fenring

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #42 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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #43 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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #44 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.

NobleHunter

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #45 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.

TheDrake

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #46 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.

LetterRip

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #47 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.

rightleft22

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #48 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.
« Last Edit: July 20, 2022, 10:37:02 AM by rightleft22 »

Tom

  • Members
    • View Profile
Re: Musk and Twitter
« Reply #49 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.)