Tesla founder and CEO Elon Musk is now having second thoughts about his announcement to buy over Twitter for US$ 44 billion, saying the company is hiding key information from him about fake posts and spam.
In a letter to the company, Musk said Twitter's current management is resisting and frustrating that delivery of information, which amounts to a clear material breach of the terms of the purchase agreement. Accordingly, Musk says he reserves all rights thereunder, including the right not to consummate the transaction.
The South African tycoon claims that Twitter is actively resisting and frustrating his right to be informed about it under the agreement.
Some analysts were speculating Musk was trying to withdraw from the deal after shares fell considerably, making a US$ 44 billion disbursement unwise.
Last month, Musk had said he would not proceed with his $44 billion acquisition of Twitter unless the social media giant can prove that bots account for less than 5% of its users.
Twitter CEO Parag Agrawal said the number of fake accounts is less than 5% when measuring daily users, a figure the company previously cited in quarterly filings.
This is a clear material breach of Twitter's obligations under the merger agreement and Mr. Musk reserves all resulting rights, including his right not to consummate the transaction and his right to terminate the merger agreement.
In Monday's filing, Musk stresses that he disagrees with Twitter's assessment. Twitter's latest proposal to simply provide additional details about the company's own testing methodologies, whether through written materials or verbal explanations, is tantamount to rejecting Mr. Musk's data requests, the letter reads.
Twitter's effort to characterize it otherwise is simply an attempt to obfuscate and confuse the issue. Mr. Musk has made it clear that he does not believe the company's lax testing methodologies are adequate, so he should conduct his own analysis. The data he has requested is necessary to do so, the note goes on.
The social media company admitted its estimate of fake or spam users may not accurately represent the actual number of such accounts, and it may be higher than estimated.
In its first-quarter results last April 28, Twitter acknowledged an error whereby from the first quarter of 2019 to the fourth quarter of 2021 it had overestimated the calculation of its daily active monetizable users by almost two million accounts.
Twitter then explained that with the March 2019 launch of a feature that allowed multiple separate accounts to be linked, an error was made at that time, such that actions through the main account resulted in all linked accounts being counted as active users.
”This resulted in an overestimate of mDAU (monetizable daily active usage or users - Twitter users who logged in and accessed Twitter on any given day through Twitter.com or Twitter applications that can show ads) from the first quarter of 2019 through the fourth quarter of 2021,” reported the company, which thus cut its mDAUs at the end of 2021 to 214.7 million from the 216.6 million initially estimated.
Specifically, the company had calculated an excess of 1.5 million mDAUs internationally, with 178.8 million instead of the actual 177.3 million, while in the United States it had estimated a total of 37.8 million mDAUs, compared to 37.5 million in the updated figure after correcting the error.
This is the second time Twitter has admitted to a similar miscalculation. In 2017 it discovered that it had overestimated its active users for three years.