by John Carney at Breitbart News
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk tweeted early Friday morning.
About two hours later he tweeted: “Still committed to acquisition.”
Twitter said in a recent filing that less than five percent of it what it calls its “monetizable daily active users” were “false or spam accounts” during the first quarter of 2022. There are many in the tech community and on Wall Street who think that’s an absurdly low number and that the real figure is much higher. Twitter gave no indication about how it arrived at the five percent figure, leaving room for doubt. Musk wants to “see the receipts,” as they say.
For the sake of argument, let’s say that Twitter is wrong and that the real number of fake accounts is higher. If the undercount is just a few percentage points, so that the real figure is seven percent, it’s probably not a big deal. What would be a big deal is if bots make up one-third or even half of Twitter’s daily active users.
The legal liabilities that would be associated with underestimating bots on that scale would be enormous. There would be suits from advertisers claiming they had been misled about how many genuine human beings were seeing their accounts. Shareholders would sue saying they had purchased shares at prices pushed artificially high by Twitter’s misstatements. Bondholders could sue alleging that they had been misled. Regulators such as the Securities and Exchange Commission and the Federal Trade Commission might bring lawsuits. Even users might be able to successfully sue Twitter by showing they had expended time and money to grow their reach on the website based on how the idea that they were reaching real people and not a “readership” made up of thirty-percent spam bots.
Even bot developers might have a case alleging they were damaged by the concealment of so many other bots on the app. Although it might be a hard sell to a jury to explain how you would not have spent so much time creating Twitter bots if you had known that so many other users were also bots.
I do not think it is possible to estimate the size of potential liability that could emerge from a significant misstatement about the number of false accounts. Since the liabilities could come from so many directions, however, it is not impossible that they amount to more than the total value of Twitter. It’s definitely within the realm of possibility that they amount to more than Twitter could afford to pay and would have to declare bankruptcy. The bankruptcy of Purdue Pharm following opioid-related misdeeds, some of which it pled guilty to, is a reminder that misleading the public and customers can be fatal for a business.
So why is Musk worried?…
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