Talks with investors have cooled in recent weeks after Musk’s camp raised doubts about recent “firefighting” data — a trove of data sold to corporate customers — that they obtained from Twitter. Musk’s team’s misgivings about the junk numbers signal they believe they don’t have enough information to assess Twitter’s prospects as a business, the people said.
Now that Musk’s team has concluded it can’t verify Twitter’s numbers on spam accounts, one of the people said, it is expected to take potentially drastic action. The person said it’s likely a change in direction from Musk’s team is coming soon, though they didn’t say exactly what they thought that change would be.
The junk accounts aren’t the only reason Musk might try to get out of the deal. Twitter’s share price has fallen dramatically since its takeover bid in April, giving the impression that it is paying too much. And Musk also runs two other major companies, Tesla and SpaceX, along with several startups.
But the terms of the deal mean it won’t be easy for Musk to leave. Musk has agreed to end it unless something major happens to Twitter’s business, and legal experts doubt the bot case would qualify. Twitter, which initially fought Musk’s takeover bid, would be a weaker company if the deal falls through than it was when Musk first bought a stake, and experts expect Twitter to struggle to make it happen. Twitter itself has said it intends to end the deal. Even if Musk convinces a judge to let him go, he may still be on the hook for the $1 billion break-up fee.
Twitter spokesman Brian Poliakoff declined to comment, but referred to a statement the company made in June.
“Twitter has and will continue to cooperatively share information with Mr. Musk to complete the transaction in accordance with the terms of the merger agreement,” Twitter said in the June statement. “We believe this deal is in the best interest of all shareholders. We intend to close the transaction and execute the merger agreement at the agreed upon price and terms.”
Musk did not respond to a request for comment.
Musk shocked the social media world earlier this year with his unprecedented bid to take the company private, arguing that he would be able to grow Twitter and make it more open and, in his mind, politically neutral. He said he would allow former President Donald Trump to return to the service and argued that his content moderation practices infringe on free speech. Musk waived his right to look deeper into the company’s finances when he signed the deal.
But soon after, questions arose as to whether he would actually follow through. A global selloff in tech stocks cut deeply into his personal net worth, which he had used to take on the debt commitments he needed to buy Twitter.
Musk’s enthusiasm to proceed with the deal has been in question since at least May, when he said the deal was “on hold” until he could ascertain whether Twitter’s long-standing claim that fewer than 5 percent of accounts are bots or spam was correct. . He accused Twitter of withholding information, while the company said it was acting in good faith and providing everything required by the terms of the agreement.
“Twitter has not been cooperative,” said a person familiar with the discussions, speaking on condition of anonymity because of the sensitive nature of the talks.
But the focus on bots plays into Musk’s hand, driving down Twitter’s stock price and potentially helping him force Twitter to renegotiate the deal at a lower price.
Musk likely understands the difficulty of pulling out at this stage, prompting him to find legal grounds to justify a departure, according to Carl Tobias, a law professor at the University of Richmond.
After raising the issue of bots, for example, Musk said Twitter’s figures could constitute a “material adverse error,” a possible reference to a contractual clause that gives him the ability to back out of the deal in the event of a material event. that fundamentally changes the business.
“I think it’s an excuse,” Tobias said. “It doesn’t seem to me that a court would find that persuasive.” Tobias cited Musk’s own waiver of due diligence in his hasty acceptance of the deal. “It seems to me that it undercuts a lot of the arguments that he might try to make otherwise,” he said.
The debate over Twitter bots is not new and has been a large part of the public conversation around the company for years. Musk frequently tweets his exasperation at the proliferation of spam and bot accounts on the site, writing in April that he aimed to “defeat the spam-bots or die trying!” via his Twitter feed. Outside researchers have sometimes said that the number of bots and spam accounts may be much higher than Twitter estimates. But because of how quickly tactics for creating and hiding the nature of fake accounts change, it’s hard even for experts to make firm statements about who’s right.
Twitter has defended its process for measuring spam accounts, including in a news conference Thursday morning.
Twitter said that every three months, it takes a sample of its “Average Daily Monetizable Users,” the user base the company feels comfortable charging advertisers to reach. It analyzes that sample by hand to determine whether they are fake or not, including looking at information such as IP addresses that it cannot share publicly. He said it has always been comfortable for the total to be below the 5 percent threshold.
Twitter doesn’t ban all bots, which includes accounts that post pictures of otter on the clock or the temperature in a certain location. Instead, it looks for indicators that suggest fake or coordinated spam activity, such as the mass creation of accounts or coordination between people to artificially amplify a specific tweet, group of tweets, or topic. The terms of the conference prevented any of the experts from being quoted directly or quoted by name.
Musk’s takeover has plunged Twitter into chaos, creating rifts among employees and concern for executives. Some workers, who fear Musk would roll back safeguards Twitter has put in place to keep harmful content off the site, have begun looking for new jobs and predict an exodus if the billionaire buys the company.
Musk has already lashed out at Twitter executives by following the company’s policies on its own site and amplifying users who criticized the company’s top lawyer.
Even if the deal falls through, Twitter has been dragged through controversy, employee unrest and struggling stock performance for months. His return will not be straightforward.
“No matter what: The company is in the game now,” a person familiar with the matter told The Post in May. “I don’t think it’s a situation where Elon leaves and things can go back to normal.”
Rachel Lerman and Joseph Menn contributed to this report.
