Elon Musk had offered $54.20 a share for Twitter but now the deal is stalled because of some evidence that the number of spam accounts and bots may be much higher than the 5% Twitter executives had listed in federal filings. Musk feels the company has been stonewalling him in explaining how they account for spam accounts and bots. Not just stonewalling but in "material breech" of the merger agreement. So now he may just walk away.
"Twitter has disclosed its bot estimate to the U.S. Securities and Exchange Commission for years, while cautioning that its estimate might be too low." However, if simple scrutiny from Musk and his team would show that the estimate is 4 times as many (as Musk has speculated) that raises the question if Twitter execs had knowingly filed fraudulent reports with the SEC.
Some critics of Musk say that since he waived due diligence that he now has to go through with the deal at the $54.20 price but SEC Rule 10b-5 "prohibits any act or omission resulting in fraud or deceit in connection with the purchase or sale of any security." Musk would argue that knowingly grossly underreporting the number of bots would be covered by Rule 10b-5.
The Texas Attorney General has already said he's opening an investigation into Twitter (Musk and Tesla are based in Texas). Could an investigation by the SEC be far behind? If the deal does fall apart the SEC should have no choice but to open an investigation. Twitter has now placed itself in a position where it will have to explain the bot numbers to Musk's satisfaction or potentially risk jail time and fines for those who filed the SEC reports.
Get your popcorn out.
The SEC under the Biden administration isn't about to do a thing to Twitter execs.
ReplyDeleteThis has the potential to drag out to close to the midterms when it will become a campaign issue. The Democrats cannot come out in favor of out-and-out fraud after the 2020 elections. There's just no way.
ReplyDeleteEven their own base will have to admit that the Party is no longer good for the country.