Musk, Twitter And The Art Of The Propaganda Coup

Elon Musk submitted more evidence on Tuesday attesting to the notion that when you’re the richest person in the history of the world, the proverbial rules of the road don’t apply.

The percentage of Twitter users comprised of “fake” or spam accounts could be “much higher” than 20%, Musk said, in a tweet, before seemingly suggesting that if the figure is in fact higher than 5% (the estimate the company includes in its quarterly filings), that would constitute a Material Adverse Effect under the merger agreement.

“My offer was based on Twitter’s SEC filings being accurate,” he continued. “Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does.”

On Monday, Musk clashed with CEO Parag Agrawal who, in a lengthy thread, attempted to reason with Musk (and the world), to no apparent avail. “Spam isn’t just ‘binary’ (human / not human),” he said, adding that,

The most advanced spam campaigns use combinations of coordinated humans + automation. They also compromise real accounts, and then use them to advance their campaign. So, they are sophisticated and hard to catch. Fighting spam is incredibly dynamic. The adversaries, their goals and tactics evolve constantly — often in response to our work! You can’t build a set of rules to detect spam today, and hope they will still work tomorrow. They will not.

There was much more. Agrawal took a painstaking walk through Twitter’s efforts to detect and eliminate spam, but it scarcely mattered. Musk’s voice is simply too loud.

I’d be remiss not to note that, to some observers, Musk’s tactics may appear to resemble those employed by conspiracy theorists. The playbook for conspiracy narratives is simple enough: Posit a conspiracy then claim that failure to disprove it is itself proof that it’s real.

Agrawal wrote that, “[W]e don’t believe that this specific estimation can be performed externally, given the critical need to use both public and private information (which we can’t share).” Musk was referring to that statement when, on Tuesday, he accused Agrawal of “refus[ing] to show proof.”

But Agrawal wasn’t “refusing” so much as he was trying to explain that Musk’s implicit ask — that Twitter walk through an internal exercise in public — simply isn’t possible. Differentiating between real accounts and fake ones in some cases entails verifying people based on personal data. Would you want Twitter to, for example, reveal your phone number and email address to the public as part of an effort to placate Musk?

Some might argue Musk is engaged in a kind of propaganda coup against a company he’s trying to acquire. He’s seemingly convinced quite a few people that the security of their private data is less important than the veracity of a metric he claims, without evidence, is fake. If pressed to provide such evidence, Musk plunges the public into a self-referential insanity loop: He claims it’s incumbent upon Twitter to prove he’s wrong.

Agrawal noted that the company “shared an overview of the estimation process with Elon a week ago.” Musk replied with a Trumpian suggestion: Twitter should call all users to verify their identity. Then, he posted a profane emoji.

Last week, Musk put the deal “on hold” pending proof of the 5% figure. At least one legal expert was dubious. “‘Temporarily on hold’ is not a thing,” Matt Levine, an M&A lawyer, wrote. “Musk has signed a binding contract requiring him to buy Twitter. He can’t just put that ‘on hold.'” But, as Levine went on to concede, the sobering reality is that Musk can do whatever he wants. Twitter has options, but no good ones.

Read more: A Bird In The Hand

The best option may be to simply let Musk buy the company for an even lower price, which Musk on Monday suggested was a possibility.

Between steep declines for US tech stocks broadly and Musk’s incessant public derision, Twitter’s shares have now erased the entirety of the gains logged since Musk’s initial stake in the company was unveiled (figure below).

With the stock trading at a ~30% discount to Musk’s offer, markets clearly doubt the deal will get done.

Tuesday’s dramatics set the stage for another tidal wave of speculation on Musk’s motives. Is he trying to get a better price? Is he struggling to line up the financing? Does he need more time to secure his preferred mix of financing? Is he just tormenting the company because he can? And so on. On Monday, The New York Post suggested he might be selling existing shares of SpaceX to raise cash for the deal.

I imagine there’s a threshold beyond which Musk could plausibly claim Twitter’s spam problem is “material” in a legal sense, but I doubt either party is interested in a protracted court battle over the issue.

To be clear, no one (including, by the way, Twitter itself) is ruling out the notion that the 5% metric could or might understate the real number of fake accounts. Additionally, I’d reiterate that Twitter has included the 5% figure in every quarterly filing going back years. Musk has seemingly created the impression that the statistic is somehow news. It’s not. Or if it is, it’s old news. That figure was available to Musk prior to his offer.

If, eventually, Musk does complete the deal, and conducts his own internal audit, expect the spam figure to be higher, at which point he’d likely say, “I told you so.” In such a scenario, it’d be interesting to see if he provides the same kind of public accounting he now demands of Agrawal.

Late last month, Musk joked (in a tweet) that he might buy “Coca-Cola to put the cocaine back in.” On Tuesday, one netizen cited  metrics for that tweet in suggesting “there’s a high possibility that the number of fake/spam/bot accounts could be well over 50%.” “Exactly,” Musk responded.