Musk threatens to walk away from Twitter deal over high fake user count

Posted:
in General Discussion edited May 17
Elon Musk insists that the $44 billion deal for Twitter cannot continue -- or the price should be lowered -- unless Twitter proves claims that fake users are less than 5% of all accounts.




After Musk temporarily put the deal to buy Twitter on hold on Friday over Twitter's claim that fewer than 5% of its accounts on the service are fake, relations between the different parties haven't improved over the following days.

On Monday, Twitter CEO Parag Agrawal tweeted a thread about Twitter spam, seemingly in response to Musk's assurance that the 5% figure was realistically closer to 20%. In the thread, Agrawal explained about the complexities of catching spam and reviewing it, as well as an assertion that Twitter's "actual internal estimates for the last four quarters were all well under 5%," using internal data.

Agrawal then disputes the ability for Musk or his team to determine how much spam there is on the service. "Unfortunately, we don't believe that this specific estimation can be performed externally, given the critical need to use both public and private information (which we can't share,)" writes the CEO.

An independent study claims that fake users as a percentage of all users could be nearly 20%. Political accounts, including Musk's own have been said to exceed 40%.

He adds that Twitter "shared an overview of the estimation process with Elon a week ago," and looked forward to "continuing the conversation with him."

20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher.

My offer was based on Twitter's SEC filings being accurate.

Yesterday, Twitter's CEO publicly refused to show proof of <5%.<br>
This deal cannot move forward until he does.

-- Elon Musk (@elonmusk)


On Tuesday, Musk tweeted that the 20% spam account figure "could be much higher" than the conservative estimate determined. Musk continued that his offer was based on "Twitter's SEC filings being accurate."

Agrawal's tweet thread is brought up by Musk, who said the CEO "publicly refused to show proof of <5%." Musk then threatened "This deal cannot move forward until he does."

In filing a preliminary proxy <a href="https://www.prnewswire.com/news-releases/twitter-files-preliminary-proxy-statement-for-acquisition-by-elon-musk-301548754.html">statement about the acquisition, Twitter says that it "is committed to completing the transaction on the agreed price and terms as promptly as practicable."

At a seminar on Monday, Musk commented on the fake user problem.

"I'm thinking about bots on Twitter," said Musk. "Apparently quantifying them is as unknowable as the human soul."

Musk told the audience there was probably four or five times the number of bots on Twitter compared to what Twitter says there are, with 20% being the lowest estimate.

He went on to say that a renegotiation at a lower price wasn't "out of the question".

It's not clear why Musk failed to do due diligence of the service before offering to buy, which should have included an accurate count of fake users. It's also not clear why the SEC hasn't said anything about Musk's Tweets or remarks at Monday's seminar, both of which are fairly textbook examples of stock manipulation -- which they have cited him for before.

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Comments

  • Reply 1 of 47
    mike fixmike fix Posts: 266member
    I thought Felon Musk was going to put an end to the fake users himself?  

    Just another grift. 


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  • Reply 2 of 47
    lkrupplkrupp Posts: 9,991member
    If the deal falls through I think the SEC would have a good case of fraud to bring against Musk. Looking like this was all theatre from the get-go.
    twokatmewmac_dogOfermuthuk_vanalingamwilliamlondonAlex1Ntyler82FileMakerFellerwatto_cobra
  • Reply 3 of 47
    sandorsandor Posts: 639member
    Would anyone really be surprised if >50% of Twitter accounts were not "fake" "spam" "bots" "non-human"?

    He didnt expect the Tesla stock hit, so his $44 billion in funding suddenly represented a majority of his on-paper fortune.
    Hopefully Twitter holds out for the $1 billion payment from him if he does back out.


    One of the most immediate fixes social media could implement is human-backed accounts.

    DaRevhammeroftruthwilliamlondonblastdoorAlex1NFileMakerFellerwatto_cobra
  • Reply 4 of 47
    hodarhodar Posts: 348member
    How are fraudulent SEC filings by Twitter, somehow Musk's fault?  All Musk did was read the forms, and calculate a value based on the reported number of Active Subscribers.

    Seems that Twitter is the one that not only misrepresented themselves, but also committed fraud to both stockholders, as well as advertisers.  I would expect to see a class action lawsuit from stockholders, as well as advertisers, who made business decisions, based upon what is supposed to be accurate data.

    Secondly, fraud in vitiates EVERYTHING.  If you agree to buy a house that you are told in writing, is 4,000 sq-ft.  You have the architectural drawings on file (analogy with the SEC filings), you have the Realtor's Contract in hand - and it all says 4,000 sq-ft; but you find out that it's actually much less than 4,000 sq-ft - how is it that somehow this is your fault?  How would it be that you are still required to purchase a contract, that was presented to you, fraudulently?  How would you be liable for the Down Payment you made?

    Simply said - you would not.  You would be entitled to all of  your money back; and the seller would be on the hook for your time, costs and efforts.  The Realtor would likely be investigated for a breach of ethics (if they exist).  Twitter is the one who lied, Twitter is the one that filed false SEC claims.  Seems pretty clear cut.
    mobirdJWSCcrowleymaximarawilliamlondonentropysfirelockCluntBaby92Alex1NMac4mac
  • Reply 5 of 47
    sandor said: Hopefully Twitter holds out for the $1 billion payment from him if he does back out
    Musk will drag that out in the court system. He previously made an agreement with the SEC to pay a fine for a fraud charge, never made any payments, and is now trying to get the fine dismissed in court.
    OferwilliamlondonAlex1Nwatto_cobra
  • Reply 6 of 47
    mac_dogmac_dog Posts: 980member
    lkrupp said:
    If the deal falls through I think the SEC would have a good case of fraud to bring against Musk. Looking like this was all theatre from the get-go.
    Exactly what I was thinking. He did the same thing with bitcoin. He needs to go radio silent—preferably for the rest of his life. 
    OferwilliamlondonAlex1Nstevenozwatto_cobra
  • Reply 7 of 47
    hodarhodar Posts: 348member
    lkrupp said:
    If the deal falls through I think the SEC would have a good case of fraud to bring against Musk. Looking like this was all theatre from the get-go.
    So on your planet, the person who catches the criminal is the one who gets punished?
    Please correct me if I am wrong, but I don't believe that Musk filed the SEC report for Twitter.

    A pre-closure audit is commonplace before a sale of any company is made.  The audit is generally an accounting of the staff, property, financial, taxes, HR and payroll, compensation packages, benefits packages, Board of Directors compensations, primary Stock Holders and breakdown of Debts and Obligations, along with Revenues and analysis of Cost of Operations.  Exposing fraud, is not a crime.
    mobirdcrowleymaximarawilliamlondonentropysJWSCfirelockAlex1NFileMakerFellerwatto_cobra
  • Reply 8 of 47

    hodar said: Seems that Twitter is the one that not only misrepresented themselves, but also committed fraud to both stockholders, as well as advertisers.  I would expect to see a class action lawsuit from stockholders, as well as advertisers, who made business decisions, based upon what is supposed to be accurate data.
    Here are some other examples of misrepresentation by another publicly held company:

    https://www.washingtonpost.com/technology/2022/04/15/elon-musk-promises/

    • March 2016: The Tesla Model 3 will cost $35,000

    • January 2017: Full self-driving Tesla cars ready in 6 months

    • November 2017: A Tesla Semi truck will arrive by 2019

    • April 2019: 1 million robotaxis on the road by 2020

    • November 2019: Tesla Cybertruck to begin production in 2021

    • April 2022: Tesla’s humanoid robot will be ready for production in 2023
    tmaycrowleyDAalsethstompyOfermuthuk_vanalingamwilliamlondonmontrosemacsAlex1NFileMakerFeller
  • Reply 9 of 47
    sailorpaulsailorpaul Posts: 321member
    A higher percentage of fake Twit accounts may give Elon a “for cause” reason to void the purchase without paying $1B to Twit’s board of Machiavelli-ators. 
    entropysFileMakerFellerwatto_cobra
  • Reply 10 of 47
    hodar said:
    How are fraudulent SEC filings by Twitter, somehow Musk's fault?  All Musk did was read the forms, and calculate a value based on the reported number of Active Subscribers.

    Seems that Twitter is the one that not only misrepresented themselves, but also committed fraud to both stockholders, as well as advertisers.  I would expect to see a class action lawsuit from stockholders, as well as advertisers, who made business decisions, based upon what is supposed to be accurate data.

    Secondly, fraud in vitiates EVERYTHING.  If you agree to buy a house that you are told in writing, is 4,000 sq-ft.  You have the architectural drawings on file (analogy with the SEC filings), you have the Realtor's Contract in hand - and it all says 4,000 sq-ft; but you find out that it's actually much less than 4,000 sq-ft - how is it that somehow this is your fault?  How would it be that you are still required to purchase a contract, that was presented to you, fraudulently?  How would you be liable for the Down Payment you made?

    Simply said - you would not.  You would be entitled to all of  your money back; and the seller would be on the hook for your time, costs and efforts.  The Realtor would likely be investigated for a breach of ethics (if they exist).  Twitter is the one who lied, Twitter is the one that filed false SEC claims.  Seems pretty clear cut.
    There is no evidence that Twitter filed a false claim other than Elon Musk saying they did. He isn’t a particularly reliable source of information. 
    OferhammeroftruthwilliamlondonmontrosemacsAlex1NFileMakerFellerwatto_cobra
  • Reply 11 of 47
    mac_dogmac_dog Posts: 980member
    Petulant child. Too much money and zero life experience/hardship. 
    Oferwilliamlondonwatto_cobra
  • Reply 12 of 47
     It's not clear why Musk failed to do due diligence of the service before offering to buy, which should have included an accurate count of fake users”

    Yeah…. His history of being an impulsive jackass certainly doesn’t explain it. 
    OferhammeroftruthwilliamlondonmontrosemacsFileMakerFellerwatto_cobra
  • Reply 13 of 47
    hodarhodar Posts: 348member

    hodar said: Seems that Twitter is the one that not only misrepresented themselves, but also committed fraud to both stockholders, as well as advertisers.  I would expect to see a class action lawsuit from stockholders, as well as advertisers, who made business decisions, based upon what is supposed to be accurate data.
    Here are some other examples of misrepresentation by another publicly held company:

    https://www.washingtonpost.com/technology/2022/04/15/elon-musk-promises/

    • March 2016: The Tesla Model 3 will cost $35,000

    • January 2017: Full self-driving Tesla cars ready in 6 months

    • November 2017: A Tesla Semi truck will arrive by 2019

    • April 2019: 1 million robotaxis on the road by 2020

    • November 2019: Tesla Cybertruck to begin production in 2021

    • April 2022: Tesla’s humanoid robot will be ready for production in 2023
    Are these SEC filings?  No, these are company goals.
    Delays in production, do they count as criminal acts?  I imagine we would be arresting Intel, Apple, GM and pretty much every other company too.  Missing production goals, and lying about your EXISTING subscriber base are two very different things; but I am sure you aware of this very basic idea.
    Twitter committed fraud to every Stock Holder.  The share price is derived by the number of Active Users, this was intentionally overstated.
    Twitter committed fraud to every Advertiser.  The cost of advertising is based on the number of potential customers, again this was intentionally overstated.
    Do you imagine that they will all just go away?
    If Apple overstated their iPhone sales by a few percentage points, what do you suppose would be the repercussions?  These are neither trick nor difficult questions.
    mobirdcrowleywilliamlondonplymouthpatsfanJWSCAlex1NFileMakerFellerwatto_cobra
  • Reply 14 of 47
    hodarhodar Posts: 348member
    “ It's not clear why Musk failed to do due diligence of the service before offering to buy, which should have included an accurate count of fake users”

    Yeah…. His history of being an impulsive jackass certainly doesn’t explain it. 
    Umm, you do your Due Diligence by reviewing the SEC forms (10K statements for each quarter).
    These are publicly available, and are the OFFICIAL STATEMENT of the company's financials, quarterly expenses, costs, debts, plans and forward mission statements.
    They are signed by the CEO and/or the CFO.
    These are the forms that Stock Brokers will analyze to set a stock price target, banks will use to determine loan amounts and percentages, and are a base for taxes.  These forms are generally "audited" by a 3rd party, before release.
    They are a big deal. A very, very Big Deal.

    That's why Elon had a $1 Billion Deposit, so he couldn't walk away.
    However, fraud in vitiates everything.  Twitter lied by overstating the actual user base, and instead of the bots being <5% as Twitter claimed, two separate 3rd party audits showed that bots were greater than 19.2% (about 400% higher than claimed).  That's serious, very, very serious.
    So, now come the law suits

    Elon was defrauded, Twitter lied to him, they lied to the SEC.  Oxley-Sarbanes Act sets up some very severe prison sentences for all involved for this.
    So, Elon could walk away, or negotiate a much lower puchase price; due to this fraud
    next, we have the stockholders, who will recieve far less share value, because Twitter committed fraud
    Finally, we have the advertisers, who overpaid for advertizing, as the consumer base they thought they were reaching, did not exist.

    yes, this is catetrophic.
    mobirdcrowleywilliamlondonentropysJWSCAlex1NFileMakerFellerwatto_cobra
  • Reply 15 of 47
    hodar said:
    “ It's not clear why Musk failed to do due diligence of the service before offering to buy, which should have included an accurate count of fake users”

    Yeah…. His history of being an impulsive jackass certainly doesn’t explain it. 
    Umm, you do your Due Diligence by reviewing the SEC forms (10K statements for each quarter).
    These are publicly available, and are the OFFICIAL STATEMENT of the company's financials, quarterly expenses, costs, debts, plans and forward mission statements.
    They are signed by the CEO and/or the CFO.
    These are the forms that Stock Brokers will analyze to set a stock price target, banks will use to determine loan amounts and percentages, and are a base for taxes.  These forms are generally "audited" by a 3rd party, before release.
    They are a big deal. A very, very Big Deal.

    That's why Elon had a $1 Billion Deposit, so he couldn't walk away.
    However, fraud in vitiates everything.  Twitter lied by overstating the actual user base, and instead of the bots being <5% as Twitter claimed, two separate 3rd party audits showed that bots were greater than 19.2% (about 400% higher than claimed).  That's serious, very, very serious.
    So, now come the law suits

    Elon was defrauded, Twitter lied to him, they lied to the SEC.  Oxley-Sarbanes Act sets up some very severe prison sentences for all involved for this.
    So, Elon could walk away, or negotiate a much lower puchase price; due to this fraud
    next, we have the stockholders, who will recieve far less share value, because Twitter committed fraud
    Finally, we have the advertisers, who overpaid for advertizing, as the consumer base they thought they were reaching, did not exist.

    yes, this is catetrophic.
    Extremely insightful.  This is all about jockeying for a lower purchase price.  You do this sort of thing when buying a house, as well, with inspections, appraisals, etc.  i would assume this is all posturing for bargaining purposes.  
    OferwilliamlondonentropysAlex1Nwatto_cobra
  • Reply 16 of 47
    JWSCJWSC Posts: 1,185member
    lkrupp said:
    If the deal falls through I think the SEC would have a good case of fraud to bring against Musk. Looking like this was all theatre from the get-go.
    On what grounds?  This is part of the negotiation process, which can be public as well as private.  Musk likely thinks he can get a better price.  And Twitter‘s board of directors have made some serious mistakes and given him the upper hand.  It’s nothing more than managerial incompetence, and Musk is exploiting it.  Nothing illegal about that.
    williamlondonentropysAlex1Nwatto_cobra
  • Reply 17 of 47
    JWSCJWSC Posts: 1,185member
    sandor said:
    Would anyone really be surprised if >50% of Twitter accounts were not "fake" "spam" "bots" "non-human"?

    He didnt expect the Tesla stock hit, so his $44 billion in funding suddenly represented a majority of his on-paper fortune.
    Hopefully Twitter holds out for the $1 billion payment from him if he does back out.

    One of the most immediate fixes social media could implement is human-backed accounts.
    So, how do you know that Musk didn’t expect the Tesla stock hit?  Firstly, we knew he was going to sell Tesla stock, and any large share sales would negatively affect the stock price.  Secondly, you have wonders like Bill Gates who publicly said he was going to short the stock.

    Agree that verification of all accounts is going to be a very good thing. It’s rather surprising that Twitter made so little effort to do it.
    williamlondonAlex1Nwatto_cobra
  • Reply 18 of 47
    crowleycrowley Posts: 10,234member
    hodar said:

    fraud in vitiates everything
    It's "vitiates", not "in vitiates" I think.
  • Reply 19 of 47
    MarvinMarvin Posts: 14,780moderator
    hodar said:
    How are fraudulent SEC filings by Twitter, somehow Musk's fault?  All Musk did was read the forms, and calculate a value based on the reported number of Active Subscribers.

    Seems that Twitter is the one that not only misrepresented themselves, but also committed fraud to both stockholders, as well as advertisers.  I would expect to see a class action lawsuit from stockholders, as well as advertisers, who made business decisions, based upon what is supposed to be accurate data.

    Secondly, fraud in vitiates EVERYTHING.  If you agree to buy a house that you are told in writing, is 4,000 sq-ft.  You have the architectural drawings on file (analogy with the SEC filings), you have the Realtor's Contract in hand - and it all says 4,000 sq-ft; but you find out that it's actually much less than 4,000 sq-ft - how is it that somehow this is your fault?  How would it be that you are still required to purchase a contract, that was presented to you, fraudulently?  How would you be liable for the Down Payment you made?

    Simply said - you would not.  You would be entitled to all of  your money back; and the seller would be on the hook for your time, costs and efforts.  The Realtor would likely be investigated for a breach of ethics (if they exist).  Twitter is the one who lied, Twitter is the one that filed false SEC claims.  Seems pretty clear cut.
    There is no evidence that Twitter filed a false claim other than Elon Musk saying they did. He isn’t a particularly reliable source of information. 
    Twitter stated in their earnings report that their mDAU (monetizable daily active users) that are spam are below 5%:

    https://d18rn0p25nwr6d.cloudfront.net/CIK-0001418091/947c0c34-ca90-4099-b328-a6062adf110f.pdf

    "our metrics may be impacted by our information quality efforts, which are our overall efforts to reduce malicious activity on the service, inclusive of spam, malicious automation, and fake accounts. For example, there are a number of false or spam accounts in existence on our platform. We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the fourth quarter of 2021 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts 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."

    Elon Musk said Twitter assesses this by checking 100 accounts:

    https://www.cnbc.com/2022/05/14/elon-musk-has-wrong-approach-to-count-fakes-spam-on-twitter-experts.html

    ""I picked 100 as the sample size number, because that is what Twitter uses to calculate <5% fake/spam/duplicate."
    Twitter declined to comment when asked if his description of its methodology was accurate."

    If it was inaccurate, they could have easily confirmed. When similar tests have been done by others, the amount was higher around 15-20% and as much as 40% for high profile users.

    If their mDAU count is highly based on bots then if they were removed, it would cause a significant drop in ad revenue (billions) so it's an important measure to know accurately when someone has a business plan to remove them. The problem is if they knew which accounts were spam/bots, they'd presumably be able to ban them already. The CEO said it's not as simple as determining automation because some people are hired to post spam-like content so they are humans but are misusing the platform.

    All Twitter has to do is apply the methodology for checking fake accounts to a larger sample size and have it audited by a 3rd party.
    hodarmuthuk_vanalingammaximarawilliamlondonentropysJWSCAlex1N
  • Reply 20 of 47
    hodar said:
    “ It's not clear why Musk failed to do due diligence of the service before offering to buy, which should have included an accurate count of fake users”

    Yeah…. His history of being an impulsive jackass certainly doesn’t explain it. 
    Umm, you do your Due Diligence by reviewing the SEC forms (10K statements for each quarter).
    These are publicly available, and are the OFFICIAL STATEMENT of the company's financials, quarterly expenses, costs, debts, plans and forward mission statements.
    They are signed by the CEO and/or the CFO.
    These are the forms that Stock Brokers will analyze to set a stock price target, banks will use to determine loan amounts and percentages, and are a base for taxes.  These forms are generally "audited" by a 3rd party, before release.
    They are a big deal. A very, very Big Deal.

    That's why Elon had a $1 Billion Deposit, so he couldn't walk away.
    However, fraud in vitiates everything.  Twitter lied by overstating the actual user base, and instead of the bots being <5% as Twitter claimed, two separate 3rd party audits showed that bots were greater than 19.2% (about 400% higher than claimed).  That's serious, very, very serious.
    So, now come the law suits

    Elon was defrauded, Twitter lied to him, they lied to the SEC.  Oxley-Sarbanes Act sets up some very severe prison sentences for all involved for this.
    So, Elon could walk away, or negotiate a much lower puchase price; due to this fraud
    next, we have the stockholders, who will recieve far less share value, because Twitter committed fraud
    Finally, we have the advertisers, who overpaid for advertizing, as the consumer base they thought they were reaching, did not exist.

    yes, this is catetrophic.
    Two things:

    1. You haven't read Twitter's SEC filings as you have failed to accurate restate what they say. 

    2. You are assuming that 3rd party audits are accurate. 

    Your post are a fantastic example of what confirmation bias looks like. 
    Ofer9secondkox2williamlondonsconosciutoAlex1N
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