Elon Musk Drafts 13-D Filing Over Twitter’s “Lax Testing”

Elon Musk does not believe Twitter’s testing is up to snuff.

Unless you’ve been living under a rock for the last two months, you’re probably aware of the ongoing saga between Elon Musk and Twitter. 

Elon Musk and Twitter: Overview

On April 4th, the controversial Tesla CEO revealed that he was now the largest Twitter  shareholder, at 9.2%. The next day, Musk declared interest in joining the Twitter board, only to abandon the idea five days later. 

Then, on April 14th, Musk first presented the idea of buying Twitter outright, offering to “unlock” the social media platform’s “full potential”. This was an idea that Twitter was initially resistant to, opting to enact a “poison pill” measure in an attempt to keep Musk at bay. 

A few rounds of funding later (and a few hefty sales of Tesla stock) and Elon’s plan to buy Twitter was on the road. Except… it wasn’t. 

Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of usershttps://t.co/Y2t0QMuuyn

— Elon Musk (@elonmusk) May 13, 2022

On May 13th, this Tweet kicked off the next saga between Elon and Twitter: disputing Twitter’s bot-count. 

In an apparent breach of Elon’s NDA with the company, he revealed some of the methods that Twitter uses to count bots. Methods that Musk says aren’t up to par. 

The Bot Count Debacle

In a June 6th 13-D filing with the SEC, Musk put his concerns in writing. The filing laid the groundwork for a potential legal battle over the matter, stating,

“ latest offer to simply provide additional details regarding its own testing methodologies, whether through written materials or verbal explanations, is tantamount to refusing Mr. Musk’s data requests. Twitter’s effort to characterize it otherwise is merely an attempt to obfuscate and confuse the issue. Mr. Musk has made it clear he does not believe the company’s lax testing methodologies are adequate, so he must conduct his own analysis, and he needs the data requested in order to do so.”

The 13-D went on to summarize the issue,

“This is a clear material breach of Twitter’s obligations under the merger agreement.” 

13-D filings like this one often get solved in front of a judge, which could potentially create issues for Musk. Critics of the Tesla CEO have pointed out that Elon waived due diligence in his quest to get the Twitter deal done as quickly as possible — a factor that the courts are unlikely to ignore. 

Additionally, Elon’s lengthy dispute over Twitter’s bot-count could be viewed as a breach of his end of the purchase agreement, with CNBC’s David Faber asking if this is truly Musk’s “reasonable best efforts” to carry out the deal. 

Some Twitter users have also speculated that this is an attempt by Elon to re-negotiate the purchase price.

Another maneuver by Elon Musk to get out of the deal or re-negotiate the price?
Musk says in an SEC filing that Twitter is breaching the merger agreement by not providing info on Bots.
Twitter is down 7% pre-market.

— Mike Eppel (@eppman) June 6, 2022

Twitter’s Pain is Tesla’s Gain

As a result of the news, Twitter’s ($TWTR) stock price plunged as much as 5.5%, while Tesla ($TSLA) surged as high as 4%. 

This is likely because Tesla shareholders believe that Twitter could potentially take Elon’s focus away from the EV company. While Elon has denied this many times, it’s clear that the market doesn’t believe he can adequately manage both companies. 

The Bottom Line

There’s one thing we can say for sure: This is not the last we’ll hear about this issue. The language used in Elon’s most recent 13-D filing indicates that he’s not going to rest until he is allowed to make his own assessment of Twitter’s bot count. Considering Twitter’s apparent resistance, this is an issue that will likely be settled in court.