Musk Takes The Red Pill?

The Musk Twitter takeover is devolving into delicious comedy:

The CEO of Tesla had roiled the markets on Friday when he placed his Twitter takeover deal on a “temporary hold” while citing the need to gauge the exact proportion of bots or fake accounts that populated Twitter’s 229 million monetizable daily users in Q1 2022.

Even though Musk had stated at the time that he was still “committed” to the deal, the CEO of Tesla recently revealed that he had received a call from Twitter’s legal team shortly thereafter for allegedly violating the Non-Disclosure Agreement (NDA). The call was prompted by a tweet from Musk where he revealed that Twitter’s in-house random sampling process used a sample size of 100. Bear in mind that Musk will have to pay $1 billion in breakup fees if the deal falls apart.

This brings us to the crux of the matter. We had noted on Friday that Musk’s suspension of the takeover deal might be a ploy to renegotiate a lower price for Twitter. Well, the latest tweet from Musk certainly adds confidence to this conjecture.

To wit, Musk has now speculated in a tweet that “over 90%” of Twitter’s daily active users might be bots or fake accounts.

There is some chance it might be over 90% of daily active users, which is the metric that matters to advertisers.

Very odd that the most popular tweets of all time were only liked by ~2% of daily active users.

— Elon Musk (@elonmusk) May 15, 2022

In the same news cycles, Musk has made it public that he now plans to vote Republican, despite his previous hiatory of voting Democrat.

Billionaire Elon Musk said he plans to vote Republican in the upcoming election cycle after voting "overwhelmingly" for Democrats in the past.

The Tesla CEO and founder made the remark on Monday while speaking via video link at a Miami tech conference, where he discussed his views on Twitter and free speech, among other topics.

One problem with trying to decode Musk is that his tongue never seems completely out of his cheek. On the other hand, as a few observers have pointed out, what Musk is implying in his tweets that Twitter's fake users number somewhere between 20% and 90% is that the company's business model is based on massive fraud. This goes beyond a simple attempt to talk the price down. That he would release the information that Twitter's sample size in claiming 5% bots was 100 -- an absurdly small number -- suggests he may well be on to something.

On the other hand, Alex Berenson, whose suit against Twitter for banning him survived Twitter's motion for summary dismissal, has this interpretation on his Substack:

Some of you have asked why I’m still chasing my lawsuit against Twitter, even after it accepted Elon Musk’s takeover offer.

Fair question. In fact, at the Berenson v. Twitter hearing on April 28, federal Judge William Alsup asked something similar. After all, if Musk is going to let Donald Trump back on, he’ll let me on too, right?

I have two answers, one practical and the other philosophical.

The practical one is that we don’t know whether the deal is going to happen - whether Musk will actually buy Twitter. This point may be the only one on which Twitter’s lawyers and I fully agree.

Musk highlighted the risks two days ago by tweeting (of course) that the deal was “on hold” because Twitter might have more fake accounts than it has admitted. Musk sent the message Friday morning, before the stock market opened, and it put Twitter shares into a tailspin. On a very positive day for stocks, the first in a while, Twitter was down about 10 percent.

Oh please. Like the man didn’t know Twitter had bots. Musk’s real concern is obvious: Technology stocks have cratered in the last month. If not for the deal, Twitter shares would probably be trading in the 20s. Thus $54.20 is a rich price (as Twitter’s board confirmed in its rush to take it).

At the same time, shares in Tesla, Musk’s car company, have plunged since he first made his offer for Twitter.

Musk has plenty on his plate. Tesla investors are clearly worried fixing Twitter will take more time and energy than he thinks and put an even bigger target on him. Electric cars are the reason Musk is the world’s richest person. He can’t like the way Tesla’s stock has performed since he started dancing with Twitter.

All in all, Musk may be suffering some buyer’s remorse. Offer to spend $44 billion in haste, repent at leisure! At the least, Musk might be hoping to jam Twitter’s board - which so far has shown all the spine one would expect from a company whose general counsel weeps in public - into accepting a lower price.

Twitter is now trading almost 25 percent below Musk’s offer, indicating investors think the odds are at least 1 in 3 the deal won’t go through.

Thus I cannot depend on Musk to let me back on, and the lawsuit must continue.

On this, I've got to side with Berenson -- he's coming off as a pretty shrewd guy, and he sees pretty clearly that he and Musk have completely different agendas. Nevertheless, I would bet that Musk has good reason for his suspicions about Twitter bots, and if so, we're venturing into Enron territory. At some point, Berenson may be left without anyone to sue.

I would also bet that Musk is too smart to take a pill from some old guy he just met on the web.