the money game

Twitter’s Legal Team Just Sucker Punched Elon Musk

Ouch … Photo-Illustration: Intelligencer; Photo: Angela Weiss/AFP via Getty Images

What a weird mess of a legal saga this Elon Musk–Twitter suit is turning out to be. It has been less than a month since the social-media company filed a complaint in Delaware Chancery Court trying to force Musk, the world’s richest man, to buy it for $44 billion. Those, of course, were simply the terms of an agreement Musk initiated back in April — before he tried to back out of it three months later by claiming the site is overrun with spambots. Since then, Musk has had a string of bad luck. First, the judge in the case turned out to be Chancellor Kathaleen McCormick, who recently — with obvious parallels to this drama — forced a private-equity company to buy a cake company it no longer wanted. Then Chancellor McCormick sided with Twitter by agreeing to an expedited trial starting October 17 (Musk wanted the trial to kick off next year) and giving Twitter’s team extra time to suggest redactions to a legal response filed late last week by Musk’s team, essentially laying out their side of the case. (The document from Musk’s side is expected to be made public at some point on Friday.)

The withholding by the court of the Musk response for a few extra days has become the center of a new round of legal drama in the case. The extra response time sounds small, and it is, but — bear with me — it is also meaningful. Lawyers for Twitter evidently used that extra time to plot a kind of legal sneak attack on Musk and filed a preemptive response to his not-yet-public response. Twitter’s new response is public, as of Thursday night. This matters not for any legal reasons — the judge already knows that Musk has filed in his response, and anyway, McCormick is unlikely to be swayed by outside opinion. It matters because of optics. Musk has spent much of his life trying to draw attention to himself, and Twitter is an important large public company that is, in a very real way, reliant on the opinions of the general public. Defining this case in the public imagination is key for both parties. Twitter just won a round of the public-facing bout.

Another remarkable aspect of Twitter’s sneak-attack filing is that Musk’s side had explicitly warned the court about that potential tactic — but McCormick apparently didn’t care. This was all pointed out by Ann Lipton, a business professor at Tulane University who has been following the case:

The fun in reading Twitter’s response to Musk’s response, though, isn’t in the legal maneuvering but in the voyeurism. The document contains lots of cherry-picked quotes of what’s in Musk’s counterclaim — giving it a kind of unauthorized feel. (Again, this was done with McCormick knowing full well that Twitter could make this filing.) Then it knocks down those claims. This is delightfully petty, particularly where both sides are engaged in the same kind of schoolyard taunting. My favorite was this little bit of hypocrisy that lawyers for Musk, the man who has tried to win this in the court of meme, wrote with a straight face: “Twitter’s Complaint, filed with personal attacks against Musk and gaudy rhetoric more directed at a media audience than this Court, is nothing more than an attempt to distract from these allegations.” Hmm.

Given this much leeway, Twitter’s lawyers do what any good attorneys would in their position and try to mess with their opponents’ heads, skewering the still-under-seal response from Musk as “fact-free” and full of gimmicks. (It’s hard to believe that could be true, since Twitter and Musk have spent the last week fighting over the extent to which proprietary data would be redacted, meaning there must be some kind of new insight or fact, even if it’s not one that can be revealed.)

As far as I can tell, though — and again, access to Musk’s response still isn’t public — Musk continues to undermine his own argument. Remember, his main complaint centers around Twitter’s practice for measuring bots — involving a metric called monetizable daily active users, or mDAU. (Essentially, mDAUs are your Twitter addicts, the people who log in every day.) Twitter estimates that 5 percent of mDAUs are bots but reserves its way of getting to that number as a trade secret. Musk’s team has argued that 5 percent is an underestimate and the more bots there are the less valuable the company is to advertisers.

So how did Musk come to feel so strongly that he was in the right about bots that he was willing to terminate the deal? Apparently, through a website called the Botometer. Here’s Twitter’s description of the site: “Musk’s ‘preliminary expert estimates’ are nothing more than the output of running the wrong data through a generic web tool,” according to the suit. But truly, this could be the coup de grâce when it comes to undermining Musk’s analysis. According to Twitter, the Botometer “earlier this year designated Musk himself as highly likely to be a bot.” Can you imagine the feeling of ecstatic joy that went through the lawyer who wrote those words? It is almost too much to bear.

But really, what’s most damning about the document isn’t what Twitter said — it’s in the arguments that Musk himself is apparently advancing. “While Twitter has repeatedly touted mDAU as a ‘key metric’ for revenue growth,” Musk apparently wrote, according to the partial excerpt in the response, “mDAU is not as closely tied to revenue as Twitter leads the public to be.” What?! This would seem to undermine Musk’s whole legal argument. The reason that bots are a problem, according to Musk, is that they pollute the pool of users that Twitter actually makes money off of — and if the company is using faulty numbers, then Musk wouldn’t be able to book as much revenue selling ads. (Twitter denies that anything is off about how it discloses its metrics.) Now he’s apparently saying that Twitter lied to him because the monetizable user base actually isn’t important to making money?

At this point, it feels like Elon Musk’s side really has to pick an argument and stick with it. The bar here for getting out of a deal is that any misrepresentations have to be so large and so egregious that any Joe Twitter User could look at it and say, Oh yeah, that ain’t right. That’s not what’s happening here so far.

Twitter’s Legal Team Just Sucker Punched Elon Musk