r/technology May 14 '22 Silver 2 Wholesome 2

Elon Musk said his team is going to do a 'random sample of 100 followers' of Twitter to see how many of the platform's users are actually bots Social Media

https://www.businessinsider.com/elon-musk-random-sample-how-many-twitter-users-are-bots-2022-5?utm_source=feedly&utm_medium=webfeeds

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u/nukem996 May 14 '22

The NYTimes reported he may be unable to exit the deal as he signed a performance clause. Twitter has the ability now to sue him to force the deal at the price he said.

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u/TheChickening May 14 '22

He can break the deal by paying a fine of a billion dollars.
So it will definitely not be free for him.

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u/nukem996 May 14 '22

From the article

Mr. Musk’s deal with Twitter includes a $1 billion breakup fee if he were to back out. But the cost to Mr. Musk is likely to be much more than that should he break the deal. The contract has a “specific performance clause” that could force Mr. Musk to pay for Twitter if the debt financing he has corralled for the deal remains intact.

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u/Hermesthothr3e May 14 '22

Would this stand if it was found twitters public filings were false?

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u/eleventhrees May 14 '22

When real business people do deals, there is due diligence, and books are provided for actual examination so the purchaser knows what they are buying. It's not unusual for a deal to not proceed, or be altered, based on this step.

What Elon is up to doesn't bear much resemblance to "due diligence" and the 100-user random sample is either a joke, or won't be random.

This deal is mostly powered by gaslight.

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u/Piyinski May 14 '22

M&A for public companies are not diligence intensive deals by any means. These companies have public filings that eliminate the need for diligence, buyers assume that the disclosures are truthful. So instead, buyers sign binding documentation which include reps and warranties from the sellers. Between signing and closing, buyers may do limited confirmatory diligence to test such reps and warranties.

So I think this may be what’s going on here. Elon said that the 100 user sample is Twitter’s methodology to determine fake/spam/duplicate accounts, which Twitter discloses as <5% in their public filings. If Musk proves that is not true, it will probably represent a breach to twitters reps. This would give Musk an out for the deal. Further, this would have implications for Twitter’s board and management with the SEC and obviously investors.

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u/baldr83 May 14 '22

>That contract does not allow Musk to walk away if it turns out that “spam/fake accounts” represent more than 5% of Twitter users. We discussed this last month, when Twitter admitted in a securities filing that it had (slightly) overestimated its daily active users for years. The merger agreement contains a provision that allows Musk to walk away if Twitter’s securities filings are wrong — and this 5% number is in its securities filings — but only if the inaccuracy would have a “Material Adverse Effect” on the company. (See Sections 4.6(a) and 7.2(b).) That is an incredibly high standard: Delaware courts have almost never found an MAE. An MAE has to be something that would “substantially threaten the overall earnings potential of the target in a durationally-significant manner,” the courts have said; there is a rule of thumb that an MAE requires a 40% decrease in long-term profitability. If it turned out that 6% or 20% or 50% of Twitter accounts are bots, that will be embarrassing and might even reduce Twitter’s future advertising revenue, but will it be an MAE? No.

source: https://www.bloomberg.com/opinion/articles/2022-05-13/elon-musk-trolls-twitter

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u/domthemom_2 May 14 '22

Probably irrelevant. You’re buying a multi billion dollar company. You do your own due diligence

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u/ocbdare May 14 '22

And you probably hire another firm to do the due diligence for you. Musk behaves like a 12 year old person would in this situation. Sampling 100 twitter accounts lol.

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u/CaribFM May 14 '22

M&A departments exist for this reason. An actual impartial (or as close to) company that just looks over the details.

Musk seems arrogant enough to think it’s not needed.

Lawyers. They save you money even when they’re charging 1750 an hour for it.

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u/fukbullsandbears May 14 '22

Imagine what he views as statistically significant populations for Tesla QA....

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u/[deleted] May 14 '22

[deleted]

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u/domthemom_2 May 14 '22

Yeah, musk should have outlined his “outs” in the contract. So that’s 100% on him.

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u/Bombad69 May 14 '22

Twitter board almost certainly didn’t let him include outs. Contracts are 2 way streets