Musk has made several claims against Twitter, including the strength of its user metrics.
He said Twitter was trying to “distract” from his many “misrepresentations”.
Twitter pushed back, saying the billionaire’s story is “implausible and contrary to fact.”
The 164-page countersuit filed confidentially by Elon Musk against Twitter is full of accusations regarding the validity of the social media company’s business claims, according to a copy obtained by Insider.
The countersuit is a further escalation in the ongoing legal fight against Musk’s bid to renege on his $44 billion deal to buy Twitter. The billionaire and the platform are already set to face off in a trial in October in a Delaware court to find out if he is legally able to walk away from the agreement to acquire the platform.
In his counterclaims, Musk argues at length that he has the right to abandon the deal altogether. He claims he was led to believe by Twitter’s public assurances to investors that its business, built around user metrics, was solid. They are far from it, he says. For months, Musk has publicly argued that Twitter has more “bots” or spam accounts than he admits. After demanding more and more information on the matter, he decided in early July to call off the deal.
Now he accuses the company of intentionally “miscounting” the number of spam accounts it hosts in order to extract its user statistics “as part of its scheme to mislead investors about business outlook”. He also claims that Twitter’s reliance on the mDAU metric, or Twitter’s monetizable daily active users, as a revenue base is inherently misleading. Meanwhile, Twitter actually has 65 million fewer daily users than it claims, according to Musk. And those who see ads and should be considered “monetizable” only have 16 million users.
Twitter’s lawsuit to enforce the merger deal is “filled with personal attacks on Musk and garish rhetoric more directed at a media audience than this court” and “is nothing more than an attempt to distract from these misrepresentations,” Musk’s counterclaims said.
“This has always been Twitter’s strategy: to distract and obscure the truth of its disclosures, first from its investors, then from the Musk parties when they began to discern the truth,” the claims continue.
Twitter pushed back against Musk’s accusations. He filed a response with the court after hours, calling the billionaire’s claims ‘a ‘concocted’ story ‘in an effort to evade a merger deal that Musk no longer found attractive once the stock market – and with it, his enormous personal wealth – has declined in value.”
“Counterclaims are a story made for litigation that is contradicted by evidence and common sense,” Twitter added.
Musk’s counterclaims were initially not publicly available because they allegedly contained information about private companies that needed to be redacted, Twitter lawyers argued. After days of back and forth between attorneys on each side, the judge handling the case in Delaware Chancery Court said the lawsuit should be made public by Friday.
Musk faces an uphill battle in his effort to pull out of the deal due to the ironclad contract he signed earlier this year, multiple experts have previously told Insider.
But his countersuit is an attempt to create a way out of the deal. While Twitter has repeatedly pointed out that Musk waived his right to know before signing the merger deal, Musk said he was going the traditional route of “trust but verify,” meaning that he trusted Twitter’s public disclosures and validated them afterwards, and negotiated the right to do so.
“The Musk parties … expected Twitter to hide nothing from its potential owner, including the extent of its fake account or spam problem,” the complaint states. “Instead, the opposite happened. Twitter played hide-and-seek for months in an attempt to run out of time before the Musk Parties could discern the truth about these depictions, which they had to close. The more Twitter evaded even simple inquiries, the more Musk Parties suspected that Twitter had misled them.”
He did it intentionally, he claimed. The platform’s user authentication process is weak, according to the counterclaims. The company does not send emails, text messages or other push notifications to users to verify them, and its CEO Parag Agrawal could not have explained to Musk how he selected accounts to be managed by moderators. humans.
Twitter handed Musk massive amounts of account and user information. Although Musk’s claims call it “limited”, his analysis so far has reportedly shown “shocking results”. In early July, for example, a review by Musk’s experts showed that “a third of visible accounts may have been fake accounts or spam.” For him, that means a “conservative floor” for spam accounts on the platform is 10%, not the 5% publicly claimed by Twitter.
This, combined with the allegation that Twitter’s mDAUs are far lower than he said, means Musk has every right to terminate his deal to acquire the company, he said. Musk asked the court to void the merger agreement and undisclosed compensatory damages.
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