Elon Musk may find a way to substantiate his claim that the spam accounts on Twitter Inc.’s platform are significantly higher than the social media company’s estimates, but legal experts say it will be difficult to show that he and investors have been misled.
On Tuesday, Musk tweeted that his $ 44 billion deal to acquire Twitter could not go ahead until the company showed evidence to support its assumption that spam accounts account for less than 5% of its user base. He says he believes the number is at least four times higher and that he will “defeat the bots or die trying.”
Independent researchers estimate that 9% to 15% of millions of Twitter profiles may be bots.
For its part, Twitter said in its regulatory filing that it had applied “significant judgment” to the conjecture and warned that its disclosure could not accurately represent the actual number of spam accounts.
These claims protect Twitter from possible lawsuits, whether by Mask about the deal or by shareholders about the veracity of the company’s regulatory statements, four security legal experts said in an interview with Reuters.
Even if Twitter’s speculation is off, a plaintiff will have to show that the San Francisco-based company deliberately sought to mislead investors – a lengthy order to prove in court. The Securities and Exchange Commission (SEC), the U.S. regulator that oversees the disclosure of publicly listed companies, will find it difficult to do so for the same reason, experts say.
“It would be difficult to lay the groundwork for an SEC enforcement lawsuit or shareholder action unless it is shown that Twitter intentionally or recklessly ignored information that showed its spam estimates were misleading,” said Howard Fisher, partner at law firm Moses & Singer.
A SEC spokesman declined to comment.
A Twitter spokesman said the company’s board planned to complete the deal and implement the merger agreement at a price agreed with Mask. Kasturi’s representatives did not respond to a request for comment.
Another legal hurdle for Mask is the decision to abandon due diligence when negotiating the Twitter deal. Legal experts say this makes it even more challenging for Musk to argue in court that Twitter has confused him.
To be sure, even if the law favors Twitter, Mask may be able to walk away or renegotiate the deal at a lower price. This is because any lawsuits are likely to be protracted, and Twitter may decide that agreeing to a lower price or accepting a $ 1 billion break-up fee would make it more understandable to pay Mask for not completing the deal, rather than try to force him. . To complete the transaction in court.
Investors are betting as much. Twitter shares ended at $ 38.32 on Tuesday, with a 30% discount to around মূল্য 54.20 per share, indicating to the market that the deal is likely to be completed at a lower price or abandoned.
Showing bad faith
To meet the legal requirements for misleading Twitter investors through spam accounts, experts will need proof that the company has acted in bad faith, experts say. This could be evidence from internal documents such as an e-mail or a whistleblower.
Urska Veliconja, a professor at Georgetown University Law School, said: “This failure must lead to a level of deliberate ignorance, not just negligence.”
The issue of fake and spam accounts is important for Twitter business. Shares of the company plunged in 2018 after clearing automated and spam accounts, prompting its monthly active users to decline by 1 million, while analysts expected gains of 1 million users.
Robert Frenchman, a partner in Frenchman’s white-collar crime at law firm Mukas, said it was possible that the SEC would review the release of Twitter’s spam account, which has attracted public attention. He added, however, that he did not expect Twitter to face any significant legal threats.
“I don’t see it as something that can be read in the materially confusing section, and I’m betting that the language has been carefully drafted and with an approach that may not be silly, but it makes sense,” Frenchman said.