the money game

Elon Musk’s Twitter Deal Is Now a High-Stakes CAPTCHA Puzzle

Photo-Illustration: Intelligencer. Photo: Jim Watson/AFP via Getty Images

Just six lifetimes weeks have passed since Elon Musk clinched an agreement to buy Twitter for $44 billion. The deal hasn’t closed yet — it was always expected to take a few months, which is normal — and on Monday, Twitter revealed that he is threatening to blow the deal up entirely. Or at least pretending to with an eye toward getting it for a lower price, given that tech stocks have been on a steady slide since the terms were inked.

You see, the world’s richest man is concerned about the bots. Musk has positioned himself as something like Harrison Ford in Blade Runner, out to kill the replicants masquerading as real people. Click on the responses to any given tweet by Musk and you’ll probably get a good understanding for why he would want to do that. There are typically hundreds, if not thousands, of replies and retweets from users who don’t appear to be real, including scams from accounts claiming to be the mogul giving away fraudulent cryptocurrencies. The reality is that bots are an issue for social media and have been one for a while. It’s a knotty problem that’s compounded by the free-speech rights of whoever actually owns those bots — rights Musk has, paradoxically, vowed to defend.

(Update: After Twitter disclosed the letter, Ken Paxton — the Attorney General of Texas, the state where Musk lives — announced that he’d launched a civil investigation into Twitter over its bots, claiming that the fake accounts “can not only reduce the quality of users’ experience on the platform but may also inflate the value of the company and the costs of doing business with it, thus directly harming Texas consumers and businesses.” The probe is being launched under the state’s deceptive practices law, and demands for information that’s broader than what Twitter usually provides to the public, like monthly users since 2017 and the number of bot accounts).

The letter Twitter revealed today would be familiar to anyone masochistic enough to get alerts every time the Tesla CEO tweets, especially from his claim about a month ago that the deal was “on hold” until he figured out what the hell was going on. According to the filing, Musk and Twitter have been going back and forth about this whole bot thing for about a month.

Are bots a bigger problem than how they appear in Twitter’s securities filings? Almost certainly yes. Parag Agarwal, the current and presumably outgoing CEO, has addressed this before. ​“We suspend over half a million spam accounts every day, usually before any of you even see them on Twitter,” he said in a thread that went on to explain how hard it is for a company to fight bots. But the thing is, yeah, Musk is probably right that there are more bots than the company is revealing. Right now, the company says less than 5 percent of its monetizable daily active users are bots, which is … a very particular metric, isn’t it? Twitter even says it’s a metric that’s “not based on any standardized industry methodology” but generally reflects who logs in every day and whom they can make money off through advertising. There are 229 million users who fall into that bucket as of the end of the last quarter, which means there may well be millions more who are part of some other, less frequently logged-on, less moneymaking category.

Musk’s most recent letter marks a bit of a new phase in his argument that this deal isn’t what he thought it was. Previously, he complained that there were more bots than meets the eye. Now he’s saying the company is withholding information for him to make that determination himself — data he says he’s entitled to as the next owner of the company even though he passed on his chance to do this due diligence before committing to the deal. This is, in his words, “a clear material breach” of the deal.

But his argument here is a little twisty. Twitter is apparently arguing it’s only obligated to provide information that has a “very specific purpose: facilitating the closing of the transaction.” Musk argues he has a right to “any reasonable business purpose related to the consummation of the transaction.” Is there a difference between the “closing” and “the consummation” of a deal? Musk seems to go on to argue that, without that information, he won’t be able to secure the financing to actually take the company over (though he didn’t seem to have any problem with that before).

The point is Musk is trying to wriggle out of the deal, and his letter is trying to make the case that it’s really Twitter who’s the bad guy here. And yes, maybe the Twitter board is twisting the screws in a way that’s not warm and friendly. It’s locked Musk into paying $54.20 a share — about 39 percent more than where the company’s trading — in a market that absolutely sucks for tech companies right now. It could be years before the share price is that high again. Not coincidentally, the board seems to have gotten over any discomfort it may have had about Musk buying the company back when the stock market and the economy were both doing better. The board members are starting to look like geniuses for taking this money — so why would they do anything to give Musk an out? For Musk to say, “Hey, you’ve got a spam problem that by your own admission could make your product bad, and I want to know the extent of that problem” isn’t exactly unreasonable.

The reality is that, for Musk, the problem isn’t bots — it’s humans. Specifically, the humans sitting on the board of the company he’s committed to buying, who are going to do everything they can to hold him to the deal. Who knows how this will play out, but I’d like to imagine how a judge assigned to oversee the breakup of this deal might react to it. Why, a judge might ask, are we asking these questions right now? Musk is familiar with what Twitter is. He’s known about the bots since before he planned to take the company over. He said he doesn’t care about the “economics” of the deal, after all. But for all the noise that’s been made about Musk being a new kind of corporate raider, it appears that Twitter is the one playing hardball here. Members of the board probably feel comfortable doing so because they know they can do just about anything and still seem like the good guys compared to Musk.

Elon Musk’s Twitter Deal Is Now a High-Stakes CAPTCHA Puzzle