Twitter in July sued Musk for withdrawing from a $44 billion acquisition agreement, alleging he breached the agreement.
In the counter-filing, entered under seal last month and obtained by The Epoch Times on Aug. 5, Musk says he relied on statements from Twitter to the U.S. Securities and Exchange Commission about key components of the company, such as the percentage of fake and spam accounts and moderation practices.
But once Musk entered the agreement, he found that the technology company refused to provide access to the company’s books and records to verify the information.
“The more Twitter evaded even simple inquiries, the more the Musk Parties grew to suspect that Twitter had misled them,” the countersuit says.
One key statistic: 238 million monetizable daily active users (users who actually see ads on the platform and thus would be considered monetizable). But that number is an overcount because there are more false and spam accounts on the platform than Twitter says, according to the filing.
There are just 173 million monetizable users and most ads are shown to less than 16 million, it says.
Twitter has said under 5 percent of its users are bots.
Musk, in a meeting in May, attempted to understand how Twitter reached that percentage. He “was astonished to learn just how meager Twitter’s processes were,” the countersuit says. Musk learned that human reviewers look at a sample of just 100 accounts, and that Twitter executives weren’t able to say how the accounts in the sample were selected.
“Unlike other platforms, Twitter did not send email, text, or other push notifications to users to verify them. Musk realized that, at best, Twitter’s reliance on and touting of its process was reckless; at worst, it was intentionally misleading,” the filing states. “Since then, Twitter’s disclosures have slowly unraveled, with Twitter frantically closing the gates on information in a desperate bid to prevent the Musk Parties from uncovering its fraud.”
Based on data Twitter has provided, analyzed using an algorithm, one-third of visible accounts in July may have been false or spam.
Twitter’s representations to the government contained “numerous, material misrepresentations or omissions that distort Twitter’s value and caused the Musk Parties to agree to acquire the company at an inflated price,” the countersuit says.
Twitter’s complaint is described as “nothing more than an attempt to distract from these misrepresentations.”
Musk is asking the court to reject Twitter’s lawsuit, award him costs and expenses, and give any additional relief the court deems proper.
Musk had offered to buy Twitter for $54.20 per share in April. In May, he put the deal on hold due to concerns about the proportion of spam accounts. Twitter CEO Parag Agarwal responded by stating that internal estimates for the last four quarters showed bots making up less than 5 percent of overall Twitter accounts.
But Musk expressed skepticism at the numbers. “You can’t pay the same price for something that is much worse than they claimed. … The more questions I ask, the more my concerns grow,” Musk, in a video call, told audiences at an event hosted by “The All-In Podcast” in May.
In July, Musk backed out from the deal, refusing to pay the $1 billion breakup fee.
In August, Twitter issued subpoenas to investors, law firms, and banks that backed Musk’s takeover bid. Meanwhile, Musk issued subpoenas to JP Morgan and Goldman Sachs, the two banks that advised Twitter. The trial is scheduled to start on Oct. 17.
In its own filing, made in response to the countersuit’s claims, Twitter said Musk had spent months “looking for an excuse to get out of the contract” and called the counterclaims “a made-for-litigation tale that is contradicted by the evidence and common sense.”
Even if the company was not properly counting bots, Musk does not have the right to walk away from the deal, Twitter says.
“When Musk offered to buy Twitter, he did not ask for—and Twitter did not make—any representations regarding the number of false or spam accounts. The merge agreement does not contain a single reference to false or spam accounts. Nor did Musk ask Twitter for any information to ‘verify’ the number of false or spam accounts before he entered into the merger agreement,” the response says.
“To the contrary, Musk forwent all due diligence—giving Twitter twenty-four hours to accept his take-it-or-leave-it offer before he would present it directly to Twitter’s stockholders,” it added.
The California-based company is denying it made any false or misleading statements in its filings to the securities commission, noting that it said in one filing that its estimate of bots “may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated.”
“We look forward to the trial in the Delaware Court of Chancery,” Bret Taylor, chairman of Twitter’s board, said in a statement.