Elon Musk has accused Twitter of deliberately miscounting the number of spam accounts on its platform as part of a “scheme” to defraud investors.
The Tesla chief executive made the allegations in a counterclaim against the social media company, which Musk is taking to court to try to get him to complete his agreed $44bn (£36.5bn) takeover of the business.
Musk repeats a claim that Twitter miscounts the amount of fake users and spam on its platform as part of a “scheme to mislead investors about the company’s prospects,” according to the lawsuit, which reveal friday Valid user numbers are a key metric for Twitter, which generates 90% of its revenue from advertisers.
The suit says Twitter’s disclosures to the US financial watchdog are inaccurate and have misrepresented the value of a company Musk has agreed to buy for $54.20 a share.
It says the filings with the Securities and Exchange Commission (SEC) contain “numerous material misrepresentations or omissions that distort Twitter’s value and caused the Musk parties to agree to acquire the company at an inflated price.”
Referring to Twitter’s lawsuit demanding that Musk buy the company, he adds: “Twitter’s complaint, filled with personal attacks against Musk and inflammatory rhetoric aimed more at a media audience than this Court, is nothing more than an attempt to distract from these misrepresentations.”
Twitter has consistently claimed that spam accounts make up less than 5% of its user base, which currently stands at just under 238 million.
Musk claims that Twitter has exaggerated the number of monetizable daily active users on the platform, or users who see ads. The number of users seeing ads is 65 million fewer, the suit claims.
Spam accounts are automated, meaning they are not operated by a human hand and are designed to manipulate users or disrupt their interactions on the platform.
Musk argues that the misrepresentations represent a “material adverse business effect” that substantially alters Twitter’s value and thus invalidates the settlement agreement. Musk pulled out of the Twitter deal in July, citing concerns about spam accounts.
Twitter’s response to Musk’s counterclaim was posted Thursday. In it, Twitter called Musk’s arguments for abandoning the deal “a story, concocted in an effort to escape a merger deal that Musk no longer found attractive once the stock market and, along with it, the his enormous personal wealth, diminished in value.”
“Counterclaims are a made-up story for litigation that flies in the face of evidence and common sense,” the response reads.
Twitter’s lawsuit to force Musk to buy the company will begin in Delaware on October 17.
Robert Frenchman, a partner at the New York law firm Mukasey Frenchman, said he doesn’t think Musk’s claims will ultimately prevail, having agreed to buy the company with a minimal amount of due diligence, but his legal claims are hurting the company.
“Whether Musk’s claim is meritorious or not, and I don’t think it is, it has made things extraordinarily difficult for Twitter. Twitter is in a kind of legal limbo as the litigation continues and the trial awaits. It’s a huge distraction for the company. It puts the strategy and direction of the company on hold,” said Frenchman, who added that Twitter is making his life “more difficult” by issuing subpoenas to associates and Tesla CEO banks.