Elon Musk has subpoenaed his friend Jack Dorsey, Twitter’s former CEO, as part of his legal effort to abandon his bid to acquire the social media company. Both parties have filed dozens of subpoena requests, asking banks, investment firms, executives, and high-profile Silicon Valley figures for information and communications about the deal.
According to legal filings, Musk’s legal team is seeking evidence about how Twitter detects, labels, and counts fake accounts. They have also asked for proof about how it uses daily active users as a key metric in its financial disclosures.
Musk, who proposed to buy Twitter earlier this year, claims that the company’s disclosed quantity of false or spam accounts is inaccurate. Rather than Twitter’s reported 5%, it is even higher than 30%. A lower number of monetizable daily active users than the number claimed by Twitter could be a good stance to justify a lower company valuation. Musk’s legal team now banks on claims that Twitter tried to “mislead investors” by providing false numbers in financial filings with the Securities and Exchange Commission.
His team wrote, “Mr. Musk and his financial advisors at Morgan Stanley have been requesting critical information from Twitter as far back as May 9, 2022 — and repeatedly since then — on the relationship between Twitter’s disclosed mDAU figures and the prevalence of false or spam accounts on the platform.” They added, “Notwithstanding these repeated requests over the past two months, Twitter has still failed to provide much of the data and information responsive to Mr. Musk’s repeated requests.”
However, Twitter has insisted that its SEC filings are accurate. Twitter’s legal team has sought out information about Musk’s communications to understand why he suddenly wants to back down from the deal.
Twitter notes that Musk’s team has “spent months trying to invent a spam disclosure problem,” but has been unsuccessful. He adds that Musk’s efforts to finance the deal ran out of steam, which opposes the legal arguments from Musk’s team.
Twitter’s lawsuit claims, “Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests. Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.”
Dorsey, who stepped down as Twitter’s CEO in November 2021, supported Musk’s move to take the company private. He tweeted, “Elon is the singular solution I trust” for Twitter.
The idea and service is all that matters to me, and I will do whatever it takes to protect both. Twitter as a company has always been my sole issue and my biggest regret. It has been owned by Wall Street and the ad model. Taking it back from Wall Street is the correct first step.
— jack (@jack) April 26, 2022
He wrote, “In principle, I don’t believe anyone should own or run Twitter. It wants to be a public good at a protocol level, not a company. Solving for the problem of it being a company however, Elon is the singular solution I trust. I trust his mission to extend the light of consciousness.”
However, both men are now locked in a legal battle hoping to emerge victorious. Twitter is trying to force the deal’s completion, and Musk is attempting to terminate the arrangement between both companies.
The trial to determine the outcome is scheduled for October, holding for 5 days starting from the 17th.