As expected, Twitter filed a lawsuit against Elon Musk on Tuesday in Delaware Chancery Court for trying to wriggle out of the $44 billion deal he put together in the first place. The whole thing is just beyond weird — and not just for the world of business, but crazy on just about every plane of interpretation. Twitter and Musk, once leery of each other but then mutually attracted through the force of commerce, are now essentially in a twisted love-hate psychodrama. Twitter, initially resistant to getting bought, is trying to force a sale upon Musk, who wanted the deal in the first place but has gotten cold feet. Now, in order for Twitter to get what it wants, it has to get in the gutter. As Bloomberg’s Conor Sen put it:
What Twitter’s 62-page lawsuit does is blow open a lot of the secrecy around the deal, which has already been subject to leaks (primarily from Musk himself) and endless speculation. Here are some of the biggest revelations from the suit.
1. Twitter is done playing nice: Up until now, most of the noise around the suit has been coming from Musk. Aside from some regulatory filings and a not-very-dramatic Twitter thread from the company’s current CEO, Parag Agrawal (which itself was in response to Musk’s comments about bots), the company has not taken its communications with the Tesla CEO into the public realm. This suit changes that: “Musk’s exit strategy is a model of hypocrisy”; “Musk’s strategy is also a model of bad faith”; “Musk … has been acting against this deal since the market started turning, and has breached the merger agreement repeatedly in the process.” It shows that Twitter’s board is far from being at a point where they can work it out with the world’s richest man — essentially curdling any speculation that they might be able to put together another deal — and are willing to force him to spend his money on them, whether Musk wants to or not.
2. Musk asked for a lot of useless data: I had to look this up, but a tebibyte is about 1.1 trillion bytes of data. Twitter gave Musk more than 49 tebibytes worth of data in response to his requests for information. This is a tremendous amount of information. As anyone who’s ever looked at a large spreadsheet knows, most of that information would be useless. The issue, though, is that Musk is the one who requested all of it. In Musk’s Friday letter, where he announced he’s officially trying to back out of the deal, he claims that he was blocked on data, and not able to make a determination with what he got. The picture from the other side shows that it may be true that he wasn’t able to come to his own independent determination, but it apparently wasn’t for lack of information.
3. But he didn’t look at the most useful thing Twitter gave him: On June 30, “Musk acknowledged he had not read the detailed summary of Twitter’s sampling process provided back in May.” I mean!!! This is the whole thing! This is what he’s been mad about, and had been whipping up his (real and bot) followers about.
Look, this is a long lawsuit with a lot of stuff in it that’s damning to Musk — claims that directly contradict what he’s said both in securities filings (where there’s a presumption of truth) and on Twitter (where the standards for honesty are basically nonexistent). But if this one is true, it could be the core of Twitter’s argument that Musk’s thundering over bots is a bunch of bullshit.
4. Musk caved on key provisions: In the early weeks of the negotiations between Twitter and Musk, the Tesla billionaire made it look like he was ready to go to war. Specifically, he threatened a tender offer to the shareholders — essentially, a way to go around the board and get the deal he wants anyway. Aggressive, but not unusual. But after that, something changed. Apparently because he wanted to get things done quickly, he let Twitter take the reins once negotiations kicked off in late April. “The agreement was negotiated through the night and, in the process, became even more seller-friendly,” the complaint says. Not only would a lack of available financing not be a hurdle, but Musk caved on requests related to approval over hiring and firing decisions, a collapse in market price, and the ability to force through “specific performance,” or, in plain English, the ability to compel Musk to buy the company even if he wants to back out.
5. Twitter is saying that Musk broke his agreement first: The core of Musk’s argument for why he wants out of the deal is that Twitter’s board broke its word on giving him the information he requested. Twitter, for its part, is saying that Musk was the first mover when it came to breaking the contract — by disparaging the company and violating his nondisclosure agreement.
6. Maybe Twitter is just running out the clock?: “Defendants’ ability to terminate the agreement before the presumptive drop-dead date of October 24, 2022 is extremely limited and carefully circumscribed,” the suit says. Twitter mentions this a few times, and asks the court for a quick resolution on this. In the world of the courts, just over three months is lightning speed, so it’s no surprise that Twitter would have sued so quickly.
7. Musk said fixing the bots problem would look “terrible”: From the suit: “Musk was well aware when he signed the merger agreement that spam accounted for some portion of Twitter’s mDAU, and well aware of Twitter’s qualified disclosures. Spam was one of the main reasons Musk cited, publicly and privately, for wanting to buy the company. On April 9, 2022, the day Musk said he wanted to buy Twitter rather than join its board, he texted [Twitter’s chairman] that ‘purging fake users’ from the platform had to be done in the context of a private company because he believed it would ‘make the numbers look terrible.’”
8. Musk’s interest in the deal collapsed with Tesla’s share price:
“As the market (and Tesla’s stock price) declined, Musk’s advisors began to demand detailed information about Twitter’s methods of calculating mDAU and estimating the prevalence of false or spam accounts,” Twitter’s suit claims.
9. Musk’s data requests have been all over the place: Data is central to Musk’s argument. But the kinds of data that he asked for are sometimes a little hard to understand in the context of trying to find bots. In May, Musk’s bankers asked for the following: “User database containing key metrics including, but not limited to, number of users, number of verified users, number of monthly active users, number of handles, etc.” That seems reasonable. But then there was this: “100 percent of Tweets and favoriting activity.” Hmm. Eventually, Musk wanted the so-called “firehose” of Twitter data — basically the full stream of live, raw data. It was apparently useless in assessing the number of bots — something Twitter tried to tell Musk. They gave it to him anyway. Here’s what Twitter said about it: “Even assuming that was a proper purpose, reviewing the full firehose data would not result in an accurate assessment or mimic the rigorous process that Twitter employs by sampling accounts and using public and private data to manually determine whether an account constitutes spam — as Twitter’s representatives had already repeatedly explained to Musk’s team.”
10. Some testy phone calls happened: On May 13, a few days after first requesting user data, Musk first tweeted that the deal was “on hold.” Then this happened: “Twitter’s deal counsel called Musk’s deal counsel. Two hours after the ‘on hold’ Tweet was published, Musk belatedly Tweeted that he was still ‘committed’ to the deal.” I wonder what was said during the next two hours?
11. Musk apparently broke his NDA: Nondisclosure agreements are a bad thing when they, say, stop employees from talking about sexual harassment at work. But they’re generally fine when it comes to, say, one billionaire buying a company for personal reasons. In May, Twitter went over its process for finding bots, which includes a random sample of 9,000 accounts per quarter, according to the suit. “Later that day, Musk Tweeted publicly a misrepresentation that Twitter’s sample size for spam estimates was just 100,” the suit claims. Is it breaking an NDA if you tweet out wrong information, deliberately or not? I don’t know!
12. Poop emoji make it into the docket: What a time to be alive.
13. Text messages were sent: A lot of this back-and-forth happens over text, which is then copy/pasted or screen-capped and put into the lawsuit. For instance: “Twitter’s concern deepened when, on June 23, 2022, Musk texted Twitter management to say that he had asked Swan ‘to depart the deal proceedings, as we are not on the same wavelength.’” (Bob Swan, former Intel CEO, was working with Musk on the deal.)
This apparently had something to do with the amount of money Twitter was projecting to make over the next three years, since Musk was having trouble lining up debt financing. Twitter has said, essentially, that that’s his problem. When they triggered their ability to get Musk to cough up financing information, Musk texted back to Agrawal and CFO Ned Segal: “Your lawyers are using these conversations to cause trouble. That needs to stop.”
14. Musk was generally causing chaos for Twitter: The would-be owner has some obligations as the incoming big shot, like approving a retention plan. However, according to the suit: “Musk has unreasonably withheld consent to two employee retention programs designed to keep selected top talent during a period of intense uncertainty generated in large part by Musk’s erratic conduct and public disparagement of the company and its personnel.” This has ended up costing Twitter money. It’s also notable because Musk accused Twitter of letting people leave the company without his explicit consent, which is something he apparently waived during negotiations.
15. Twitter will use Musk’s Tweets against him: On Monday, I wrote about how Musk is taking his case against Twitter to the social-media site, while Twitter is taking it to court — two very different arenas. Twitter is arguing that his very tweets show that he hasn’t been acting in a serious way from the beginning: “Musk posted Tweets implying that his data requests were never intended to make progress toward consummating the merger, but rather were part of a plan to force litigation in which Twitter’s information would be publicly disclosed,” it says, along the included pictures of the tweets.