Texas AG gets into the Musk/Twitter battle by asking Twitter to provide spam data

Zoom / Texas Attorney General Ken Paxton speaks to reporters in front of the US Supreme Court in Washington, DC, on April 26, 2022.

Getty Images | Stephanie Reynolds

Texas Attorney General Ken Paxton on Monday got into the Elon Musk/Twitter battle by launching an investigation into whether Twitter was hiding the extent of the spam account problem. Paxton announced the investigation in a press release that echoed Musk’s allegations and sent Twitter a message demanding the same types of data on the fake accounts that Musk was unable to obtain.

“Twitter has received intense scrutiny in recent weeks over the claim in its regulatory filings that less than 5 percent of all users are bots, when in fact they may make up as much as 20 percent or more,” Paxton’s announcement said. Paxton’s press release says that inaccurate estimation of bot accounts may “inflate company value and transaction costs, and thus directly harm Texas consumers and businesses.”

Although Paxton’s press release did not mention Musk, the “extreme scrutiny” was prompted by Musk’s claim that the Twitter spam account’s estimate was wrong. Additionally, Paxton’s concern that incorrect spam data would “inflate the value” of Twitter comes amid Musk’s attempts to exit or renegotiate his $44 billion deal to buy Twitter — Musk agreed to pay $54.20 per share, the price of which was Twitter shares $39.59 at market close on Monday.

Paxton launched his investigation hours after Musk threatened to pull out of the purchase deal on Twitter in a letter that alleged the company had violated a merger agreement by refusing to provide the data behind its spam estimates. Paxton’s announcement also came a week after the US Supreme Court blocked a law in Texas prohibiting social media companies from modifying content based on a user’s “view”.

Paxton and Musk mischaracterized Twitter’s spam estimate

Paxton’s press release echoes Musk by inaccurately describing the Twitter spam account’s appreciation. Twitter does not claim that “less than 5 percent of all users are bots.” What Twitter says is that less than 5 percent of monetized daily active users (mDAUs) are spam or fake, and the company defines mDAU as “accounts that have logged in or are authenticated and accessed Twitter on any given day of Through twitter.com and Twitter applications that can display ads, or paid Twitter products, including subscriptions.”

While Paxton’s announcement merges “all users” with Twitter’s mDAU stats, the civil investigation request sent by his office was more accurate. It asks for 23 types of documents, including documents showing the “average daily active users of Twitter” for each month from 2017 to present” and documents about the number of non-original Twitter accounts.

Paxton’s request letter appears to assume that Twitter’s mDAU stats are wrong. The thirteenth out of 23 requests seeks “documents that conflict with your public statements that less than 5% of ‘pseudo or spam accounts’ are included in the ‘Monetable Daily Active Users’ scale.” (The word is written “Your” is a capital letter in the letter and is used interchangeably with “Twitter”).

Paxton claims that the Twitter spam estimate may be “false, misleading, or deceptive” under the Texas Deceptive Business Practices Act. His request letter said state law (specifically, Section 17.61) gives his office the authority to demand the documents and said Twitter has until June 27 to comply.

“Texas rely on Twitter’s public statements that nearly all of its users are real people,” Paxton said. “It matters not only regular Twitter users, but also Texas businesses and advertisers who use Twitter for their living. If Twitter is misrepresenting the number of fake accounts to increase their revenue, it’s my duty to protect Texas.”

Twitter declines to comment on Texas investigation

Twitter declined to comment on the Texas investigation when contacted by Ars today. But the company yesterday rejected Musk’s allegations that Twitter violated the merger deal and said it would implement the agreement at the original price.

“Twitter has and will continue to collaboratively share information with Mr. Musk to complete the transaction in accordance with the terms of the merger agreement,” the company’s statement said on Monday. “We believe this agreement is in the interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”

Musk’s offer to buy Twitter waived his “business due diligence,” but claims he is entitled to more spam data because “this information is necessary to facilitate closing the deal.” Musk said he needed the data to get funding and prepare for the transfer of ownership and claimed he had “the right to terminate the merger agreement.”

While the sale agreement allows Twitter or Musk to close the deal and pay a $1 billion breakup fee under certain circumstances, Musk won’t necessarily be able to walk away from it for just $1 billion. A specific performance clause in the merger says that if Twitter fulfills its obligations, it is “entitled to specific performance or other fair compensation” for causing the stock investor to [Musk] To finance equity financing, or to enforce the equity investor’s obligation to finance equity financing directly, and to complete the closing process. “

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