Texas AG enters Musk/Twitter fight by ordering Twitter to provide spam data

Texas AG enters Musk/Twitter fight by ordering Twitter to provide spam data

Texas Attorney General Ken Paxton standing in front of the US Supreme Court building.
Enlarge / Texas Attorney General Ken Paxton speaks to reporters in front of the US Supreme Court in Washington, DC, on April 26, 2022.

Getty Images | Stefani Reynolds

Texas Attorney General Ken Paxton on Monday stepped into the Elon Musk/Twitter battle by launching an investigation into whether Twitter is hiding the extent of its spam-account problem. Paxton announced the investigation in a press release that echoes Musk’s claims and sent Twitter a letter demanding the same types of data on fake accounts that Musk hasn’t been able to get.

“Twitter has received intense scrutiny in recent weeks over claiming in its financial regulatory filings that fewer than 5 percent of all users are bots, when they may in fact comprise as much as 20 percent or more,” Paxton’s announcement said. Paxton’s press release says that an inaccurate estimate of bot accounts may “inflate the value of the company and the costs of doing business with it, thus directly harming Texas consumers and businesses.”

Though Paxton’s press release didn’t mention Musk, the “intense scrutiny” has been driven by Musk claiming that Twitter’s spam-account estimate is wrong. Additionally, Paxton’s concern that incorrect spam data would “inflate the value” of Twitter comes amid Musk’s attempts to get out of or renegotiate his $44 billion deal to buy Twitter—Musk agreed to pay $54.20 per share, and Twitter’s stock price was $39.59 at the market close on Monday.

Paxton launched his investigation hours after Musk threatened to pull out of his Twitter purchase deal in a letter that claimed the company violated the merger agreement by refusing to provide the data behind its spam estimates. Paxton’s announcement also came a week after the US Supreme Court blocked a Texas law that prohibits social media companies from moderating content based on a user’s “viewpoint.”

Paxton and Musk mischaracterize Twitter spam estimate

Paxton’s press release echoes Musk by inaccurately describing Twitter’s spam-account estimate. Twitter does not claim that “fewer than 5 percent of all users are bots.” What Twitter says is that fewer than 5 percent of monetizable daily active users (mDAUs) are spam or fake, and the company defines mDAUs as “accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com, Twitter applications that are able to show ads, or paid Twitter products, including subscriptions.”

While Paxton’s announcement conflates “all users” with Twitter’s mDAU statistic, the Civil Investigative Demand his office sent is more precise. It asks for 23 types of documents, including ones showing “Twitter’s ‘average monetizable daily active users’ for each month from 2017 to the present” and documents on the number of inauthentic Twitter accounts.

Paxton’s demand letter seems to presume that Twitter’s mDAU statistic is false. The 13th of its 23 demands seeks “documents that contradict your public statements that as few as 5% of ‘false or spam accounts’ are included in your ‘monetizable daily active users’ metric.” (“Your” is capitalized in the letter and used interchangeably with “Twitter.”)

Paxton alleges that Twitter’s spam estimate may be “false, misleading, or deceptive” under the Texas Deceptive Trade Practices Act. His demand letter said the state law (specifically, section 17.61) gives his office authority to demand the documents and said that Twitter has until June 27 to comply.

“Texans rely on Twitter’s public statements that nearly all its users are real people,” Paxton said. “It matters not only for regular Twitter users, but also Texas businesses and advertisers who use Twitter for their livelihoods. If Twitter is misrepresenting how many accounts are fake to drive up their revenue, I have a duty to protect Texans.”

Twitter declines comment on Texas investigation

Twitter declined to comment on the Texas investigation when contacted by Ars today. But the company yesterday pushed back against Musk’s claims that Twitter violated the merger deal and says it will enforce the agreement at the original price.

“Twitter has and will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement,” the company’s statement Monday said. “We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement at the agreed price and terms.”

Musk’s offer to buy Twitter waived “business due diligence,” but he claims he is entitled to more spam data because “this information is necessary to facilitate the closing of the transaction.” Musk said he needs the data to obtain financing and prepare for the ownership transition and claimed he has a “right to terminate the merger agreement.”

While the sale agreement lets either Twitter or Musk kill the deal and pay a breakup fee of $1 billion under certain circumstances, Musk won’t necessarily be able to get out of it for only $1 billion. A specific performance provision in the merger deal says that if Twitter meets its obligations, it “shall be entitled to specific performance or other equitable remedy” to “cause the Equity Investor [Musk] to fund the Equity Financing, or to enforce the Equity Investor’s obligations to fund the Equity Financing directly, and to consummate the Closing.”

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