Elon Musk’s legal team has filed their official response to Twitter’s lawsuit

Elon Musk’s legal team has filed their official response to Twitter’s lawsuit

In the response to Twitter’s complaint, which includes counterclaims against the company, Musk’s team is trying to refute the company’s claims that the Tesla boss is wrongfully trying to back out of the deal. His team reiterates claims that Twitter has misrepresented the number of fake and spam bot accounts on its platform — a key charge Musk has made to justify terminating the acquisition deal after initially citing a desire to “fight the spambots” as a reason for buying the company.

Musk’s response, which was filed publicly on Friday, says the billionaire’s team conducted an analysis of fake and spam accounts on the platform using data provided by Twitter’s “firehose” of tweets and a public tool called Botometer created by researchers at the University of Indiana. It did not further detail the process of this evaluation and added that the analysis was “limited” by a lack of time and information from Twitter.

Based on that analysis, Musk claims that during the first week of July, spambots accounted for 33% of visible accounts on the platform and about 10% of Twitter’s monetized daily active users, or mDAU. (Twitter, for its part, has consistently reported that spam and fake bot accounts account for less than 5% of mDAU.)

Twitter has repeatedly denied Musk’s claims about the proliferation of spambots on the platform. Twitter Chairman Bret Taylor tweeted on Thursday evening a link to the company’s response to his response and counterclaim. (Musk’s team had submitted a confidential version of the response last week to provide Twitter (TWTR) time to review it for company information that should be redacted before it is made publicly available Friday.) Taylor called Musk’s claims “factually inaccurate, legally insufficient and commercially irrelevant.”

In its response, Twitter takes issue with Musk’s analysis of spambots, saying the “firehose” of data he used “reflects many Twitter accounts not included in mDAU” and that the Botometer tool he used relies on a different process than the company to determine whether an account may be a fine. It added that Botometer “was designed earlier this year by Musk himself as highly likely to be a bot.”

Back and forth between Twitter and Musk offers a preview of the arguments each side will make when the case goes to trial, assuming they don’t agree to a settlement first. A five-day trial is due to start on October 17, after Twitter had pushed to speed up proceedings.

Musk last month opted out of the deal to buy Twitter, accusing the company of breaching the deal by making misleading statements about the number of bot accounts on the platform and withholding information he claims could help him evaluate the problem. Days later, Twitter filed a lawsuit against the billionaire, alleging that he had breached the agreement and asking a court to force him to follow through on the deal.

In addition to doubling down on concerns about bot accounts, Musk’s response also criticized Twitter’s use of revenue-generating daily active users, a metric Twitter publicly reports to advertisers and shareholders to represent its growth.

Musk claims that his evaluations show that only a small portion of Twitter users consider mDAU to actually generate significant revenue for the company by viewing and engaging with ads, and argues that the measure is not actually as good an indicator of future revenue growth potential and long-term performance as Twitter’s public records suggest.

“Twitter also does not publish the methodology it follows to determine the mDAU count, or how it excludes non-monetizable accounts from that calculation,” Musk’s response said. “Therefore, it is extremely difficult for any third party to completely replicate Twitter’s mDAU metrics.”

Musk’s response claims that Twitter management has incentives to report “high mDAU numbers to pique investor interest” and because its executive compensation structure is based in part on mDAU.

The trial between Twitter and Elon Musk now has a date

In its response, Musk’s team explains that the billionaire is concerned with the spambot problem because “transferring users who do not generate any income to more active users … is not an easy task.” Musk’s team adds: “A company focused on adding these active users will invest significant resources in trying to improve Twitter to maximize engagement, for example by effectively targeting spam or fake accounts.”

Twitter said in its response to Musk’s counterclaims that the mDAU count never purported to show how many users generate significant revenue by interacting with ads, but rather shows the number of real users who can earn money by being served ads. It also noted that Musk’s mDAU-related claim was not included in his initial termination notice and “is a newly invented legal position.”

The company also continues to maintain that the issue of robots is not, and has never been, relevant to the execution of the acquisition agreement. “Musk has received massive amounts of information from Twitter, for months, and has been unable to come up with a valid excuse to pull out of the contract,” Twitter’s response said.

In a letter to Twitter employees included in Friday’s regulatory filing, Twitter general counsel Sean Edgett said that while Twitter had the option to request redactions in Musk’s response, it chose not to. (Twitter had previously sent a letter to the judge overseeing the case, asking her to ensure that Musk’s team would not file the public response early, so they would have enough time to review it for potential redactions.)

“We chose not to redact any information — we fully stand by our SEC filings, the methods we use to calculate mDAU, and our statements about the percentage of spam accounts on our platform,” Edgett said in the letter.

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