(CNN Business) — It’s not every day a huge corporate lawsuit features a poop emoji, but it’s not every day one of the world’s most influential social media platforms sues the world’s richest man to buy it either.
Twitter on Tuesday filed a lengthy and colorful lawsuit against Elon Musk that seeks to force the Tesla CEO to go ahead with his $44 billion buyout deal, after he took steps last week to end the takeover.
Musk, who initially framed his desire to acquire Twitter in ambitious terms as “important to the future of civilization,” has attributed his change of heart to concern about the number of bots and spam accounts on the platform. He accused Twitter of violating the deal (a binding agreement he signed without negotiating on a bot-related data provision) by failing to provide the information he says it needs to assess the extent of the problem.
In its lawsuit, Twitter tries to paint a different picture: that of a fickle billionaire who had buyer’s remorse after the tech market, along with Twitter stock, fell amid rising interest rates, inflation and fears of a recession. He also notes that shares of Tesla, which Musk relies on to fund much of the deal, have fallen sharply in recent weeks. “The structure of Musk’s financing meant that the merger could be significantly more expensive for him if Tesla’s share price fell,” the complaint states.
The 62-page document, which is peppered with memes, tweets and some emoji, effectively lays out the strange spectacle of the deal from its inception to where it currently stands. It also shows the unusual position Twitter is in now. The company paints Musk as an unserious potential owner, stating at one point that he has “disdain” for the company, and at another saying that “Musk’s strategy is… a model of bad faith,” while trying to force him to to become its owner. (Twitter’s board of directors has an obligation to its shareholders to try to make the deal go through if it thinks it’s in their best interest. The dispute could also end in a settlement.)
Musk did not respond to a request for comment on the lawsuit. In a tweet Tuesday night, shortly after the lawsuit, he said, “Oh the irony lol.”
oh the irony lol
— Elon Musk (@elonmusk) July 12, 2022
These are some of the highlights of Twitter’s complaint against Musk.
Twitter denounces Musk’s sudden change on bots
In his letter to terminate the agreement, Musk accused Twitter of making “materially inaccurate” representations related to the number of fake and spam accounts on the platform, and of not providing him with enough data to assess the problem. In its lawsuit, Twitter attempts to refute those claims by exposing how Musk went from wanting to buy the company to deal with the bots to wanting out of the deal because of them.
On April 9, the day Musk said he wanted to buy Twitter outright rather than join its board of directors, the suit alleges that Musk texted Twitter chairman Bret Taylor to say that “‘Purge of fake users’ from the platform had to be done in the context of a private company because he believed it would ‘make the numbers look dire,'” according to the suit. On April 21, days before the deal was signed, Musk tweeted: “If our Twitter bid succeeds, we will beat the spam bots or die trying!”
Crucially, according to the suit, “Musk made his offer without seeking any representation from Twitter regarding his estimates of spam or fake accounts.”
In the weeks following the deal, Musk began raising concerns that the number of spam and fake accounts could be higher than the 5% monetizable daily active users (mDAU) that Twitter had publicly reported. On May 13, Twitter held a two-hour prospect meeting with Musk, explaining that its spam estimation process involves daily sampling of a total pool of about 9,000 accounts per quarter that are manually reviewed, according to the complaint. That same day, Musk tweeted that the company uses a random sample of 100 accounts to estimate the prevalence of spam accounts.
Twitter, which under the agreement reserved the right to determine whether a request for information was “reasonable,” says it continued to attempt to share information with Musk, including, on May 21, “a detailed summary document outlining the process that company uses to estimate spam as a percentage of mDAU. However, Musk “showed little interest in understanding Twitter’s process for estimating spam counts,” according to the complaint.
“In a June 30 conversation with [el director financiero de Twitter, Ned] Segal, Musk acknowledged that he had not read the detailed summary of the Twitter sampling process provided in May,” the complaint states. “Once again, Segal offered to spend time with Musk and review the detailed summary of the Twitter sampling process. , as the Twitter team had done with Musk’s advisers. That meeting never happened despite multiple Twitter attempts.”
As part of the acquisition agreement, Musk agreed not to post tweets that “denigrates the Company or any of its Representatives.”
Twitter’s lawsuit lists several instances in which Musk appeared to disparage Twitter after the deal was signed. One such example: After Twitter CEO Parag Agrawal tweeted an explanation of the company’s process for measuring spam accounts, “Musk responded with another derogatory tweet,” the suit states. The court filing includes said tweet, which simply contains a poop emoji.
Creating a Twitter competitor
In the days leading up to the reveal of his big Twitter share, Musk tweeted that he was “seriously” thinking about creating a rival platform. Apparently he was also threatening to take that step directly to the Twitter address at the time.
On March 26, Musk met with Twitter founder Jack Dorsey and board member Egon Durban to discuss “the future of social media and the possibility of Musk joining the board.” Twitter,” according to the complaint. Shortly thereafter, Musk told Twitter CEO Parag Agrawal and Twitter Chairman Bret Taylor that he had three options in mind regarding Twitter: join their board, take the company private, or create a competitor,” the lawsuit states.
With due diligence or without it?
Much has been made of the fact that Musk signed a binding agreement without first conducting due diligence on Twitter. In their termination letter on Friday, Musk’s lawyers disputed that notion, stressing that he “negotiated access and information rights under the Merger Agreement precisely so that he could review data and information important to Twitter’s business before funding and completing the transaction.” transaction”.
However, Twitter contends that after initially making an offer conditional on due diligence, Musk obtained funding commitments for the deal and then submitted an updated offer on April 21 stating that his offer was “no longer subject to commercial due diligence.” “.
In his securities presentation, Musk described his offer as “seller-friendly.” The company’s complaint says that “Twitter had taken the ‘vendor-friendly’ draft deal that Musk claimed and secured other key concessions to make it even more so. Not only were there no financing or due diligence conditions, but Musk had already secured debt commitments that, along with his personal capital commitment, would be sufficient to finance the purchase.
Disagreement over Twitter employees
In his termination letter, Musk contends that Twitter had breached its obligation to seek his consent before deviating from its commitment to conduct business in “the ordinary course” when it fired two top executives last month and, more recently, when he announced he was laying off a third of his talent acquisition team.
However, Twitter claims that as part of the acquisition deal, it negotiated the ability to hire and fire employees at all levels without seeking Musk’s consent.
“The initial draft of Musk’s merger agreement would have considered the hiring and firing of an employee at the vice president level or above to be an alleged violation of the ordinary course covenant without Musk’s consent,” the suit states. “Twitter managed to remove that provision before signing.”
Additionally, Twitter alleges that Musk has “withheld consent to two employee retention programs designed to keep selected top talent during a period of intense uncertainty generated in large part by Musk’s erratic conduct and his public disdain for the company.” .