Elon Musk texted before Twitter deal that 'drastic' action was needed to tackle bots – Yahoo Finance
Tesla CEO Elon Musk’s text messages, made public Thursday in his legal dispute with Twitter (TWTR), show he communicated about its fake account issues both before and after agreeing to buy it for $44 billion.
The revelation that he acknowledged those issues prior to the deal could be important because Musk cited the prevalence of fake accounts on Twitter as his key reason for backing out of the agreement on July 8. Twitter, for its part, claimed his stated concern about fake accounts was a pretext for ditching the deal and sued him four days later to force him to go through with it.
Fake accounts, also known as bots, can spread misinformation and scare off advertisers, who want to sell ads to real people. Musk told a Twitter board member back in April — before he agreed to buy Twitter — that "drastic" action was necessary to tackle bots, according to the newly released text messages.
“This is hard to do as a public company, as purging fake users will make the numbers look terrible, so restructuring should be done as a private company,” he said.
“This is Jack’s opinion too,” Musk said, referring to Twitter co-founder and former CEO Jack Dorsey.
In trying to back out of the deal, Musk said Twitter lied to securities regulators when it reported that bots or spam accounts make up less than 5% of its monetizable user accounts. He says Twitter refused to give him data that would let him independently calculate those figures; the company says Musk waived his right to that data.
Musk's knowledge about the platform's spam and bot account troubles, the company's lawyers argue, shows Musk had taken the issue into account before he agreed to buy Twitter. The case is scheduled for a five-day trial starting on Oct. 17 in the Delaware Chancery Court.
The text messages emerged as part of a discovery process that has made headlines.
'The bot problem is severe'
In a March 31 text, Musk wrote about crypto spam on the platform, saying that it “really needs to get crushed. It’s a major blight to the user experience and they scam so many innocent people.”
Then on April 4, Musk became Twitter’s largest shareholder by acquiring a 9% stake and the next day, Twitter said he would join the board. The day after that, the animator and "Rick and Morty" co-creator Justin Roiland texted Musk to urge him to connect with two friends whose program he said could verify Twitter users as real versus a troll farm.
On April 7, Musk wrote to Twitter CEO Parag Agarwal asking for the company’s engineering team to help him understand the platform’s underlying technology during an upcoming meeting.
“I would like to understand the technical details of the Twitter codebase,” Musk texted ahead of a proposed meeting Agarwal suggested between Musk and Twitter engineers. “This will help me calibrate the dumbness of my suggestions.”
Then in an about-face On April 9, Musk messaged Agarwal that he wasn't joining the board because it would be “a waste of time.” Instead, Musk said, he'd make an offer to buy the company. Around the same time Musk exchanged messages with his brother, Kimbal Musk, saying he thought a new blockchain-based social media company was needed.
Minutes later Musk, messaged Twitter board member Bret Taylor, saying that continued chats with Agarwal would not fix Twitter and that “drastic action is needed.”
On April 14, Musk messaged Steve Davis, president of the Musk-backed Boring Company, describing a pay-to-post backup plan to a deal with Twitter. “My Plan B is a blockchain-based version of Twitter, where the ‘tweets’ are embedded in the transaction as comments,” he wrote.
However, Musk later wrote to Morgan Stanley's Michael Grimes, saying a blockchain-based Twitter was not possible due to bandwidth and latency issues.
In another April 14 message, angel investor Jason Calacanis messaged Musk: “You could easily clean up bots and spam and make the service viable for many more users — removing bots and spam is a lot less complicated than what the Tesla self driving team is doing.”
April 25, the day Musk and Twitter entered into the merger agreement, Musk told his son, James Musk, "The bot problem is severe."
On May 8, Musk wrote again to Morgan Stanley's Grimes: "An extremely fundamental due diligence item is understanding exactly how Twitter confirms that 95% of their daily active users are both real people and not double counted.
They couldn't answer that on Friday which is insane. If that number is 50% or lower, which is what I would guess based on my feed, then they have been fundamentally misrepresenting the value of Twitter to advertisers and investors. To be super clear, this deal moves forward if it passes due diligence, but obviously not if there are massive gaping issues. True user account is a showstopper if actually much lower than the 95% claimed."
In addition to texts over bots, Musk expressed concerns over the company's financials.
On June 17, Musk wrote to a recipient whose name is redacted, "Their revenue projections seem disconnected from reality."
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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