- Musk has made several claims against Twitter, including about the reliability of its user metrics.
- He said Twitter was trying to “distract” from its many “misrepresentations”.
- Twitter hit back, saying the billionaire’s story was “implausible and contradicts the facts.”
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Elon Musk’s confidential 164-page counterclaim against Twitter is full of allegations about the validity of the social media company’s business claims, according to a copy obtained by Insider.
The counterclaim is another escalation in an ongoing legal battle over Musk’s attempt to back out of his $44 billion deal to buy Twitter. The billionaire and the platform are already scheduled to go head-to-head in a lawsuit in October in a Delaware court over whether he can legally back out of the deal to acquire the platform.
In his counterclaims, Musk argued at length that he had the right to walk away from the deal entirely. He claims he was led to believe by Twitter’s public assurances to investors that its business built around user metrics was sound. They are far from it, he claims. For months, Musk has publicly claimed that Twitter has more “bots,” or spam accounts, than it admits. After pushing for more and more information on the issue, he decided in early July to cancel the deal.
He now accuses the company of deliberately “misreporting” the number of spam accounts it hosts to boost its user metrics “as part of its scheme to mislead investors about the company’s prospects.” He also argued that Twitter’s reliance on the metric mDAU, or monetizable daily active Twitter users, as a basis for revenue is itself misleading. Meanwhile, Twitter actually has 65 million more daily users than it claims, according to Musk. And those who see ads and should be considered “monetizing” are only 16 million users.
Twitter’s lawsuit to enforce the merger agreement is “filled with personal attacks on Musk and ginger rhetoric aimed more at the media audience than this court” and “is nothing more than an attempt to distract from these erroneous claims” , Musk’s counterclaims say.
“This has been Twitter’s strategy all along: to distract and obfuscate the truth about its revelations — first from its investors and then from Musk’s parties as they began to recognize the truth,” the claims continued.
Twitter denied Musk’s accusations. He filed a response in court after hours, calling the billionaire’s claims a “story” concocted “in an attempt to escape a merger deal that Musk no longer found attractive after the stock market — and with it his vast personal wealth — declined in value.”
“Counterclaims are a litigious fairy tale that flies in the face of evidence and common sense,” Twitter added.
Musk’s counterclaims were not initially available to the public because they were claimed to contain information about a private company that should have been redacted, Twitter’s lawyers argued. After days of negotiations between lawyers on each side, the judge overseeing the case in Delaware court said the case should be made public by Friday.
Musk faces an uphill battle in trying to walk away from the deal because of the ironclad contract he signed earlier this year, multiple experts previously told Insider.
But his counterclaim is an attempt to create a way out of the deal. Although Twitter has repeatedly argued that Musk waived his right to information before signing the merger agreement, Musk says he followed the traditional path of “trust but verify,” meaning he relied on public disclosures on Twitter and has validated them thereafter and agreed to the right to do so.
“The Musk parties … fully expected that Twitter would not hide anything from its future owner, including the extent of its fake or spam account problem,” the complaint said. “Instead, the opposite happened. Twitter played a game of hide and seek for months to try to run out the clock before Musk’s parties found out the truth about these dealerships they had to close. The more Twitter avoided even simple inquiries, the more Musk’s parties grew suspicious that Twitter had misled them.”
This was done on purpose, he claimed. The platform’s process for authenticating users is weak, according to counterclaims. The company doesn’t send emails, texts or other push notifications to users to verify them, and its CEO Parag Agrawal said he couldn’t explain to Musk how it chose which accounts should be managed by human moderators.
Twitter has given Musk a huge amount of information about accounts and users. Although Musk’s claims call it “limited”, his analysis so far shows “shocking results”. In early July, for example, a review conducted by Musk’s experts found that “a third of visible accounts may have been fake or spam accounts.” To him, that means a “conservative threshold” for spam accounts on the platform is 10%, not the 5% that Twitter publicly claims.
That, combined with the claim that Twitter’s mDAUs are much lower than it says, means Musk has every right to end his deal to acquire the company, he said. Musk asked the court to void the merger agreement and for undisclosed compensatory damages.
Are you a Twitter employee or have information to share? Contact Kali Hays at khays@insider.com, on the secure messaging app Signal at 949-280-0267 or via Twitter DM at @hayskali. Connect using a non-working device.
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