Entrepreneur and billionaire Elon Musk has launched a countersuit against Twitter Inc (NYSE: TWTR), the company he had previously sought to take over before backing out of the deal. His move comes just a few weeks after Twitter filed suit against Musk in Delaware’s Chancery Court, seeking to force him to complete the US$44 billion sale.
Musk made the offer in April 2022, but announced he was backing out of the deal soon after. At issue was Twitter’s reluctance to provide accurate information on how much of its traffic is generated by individual humans and how much is by PR campaigns and automated bots. Musk claims the actual percentage of “fake” activity on the social network is far higher than Twitter’s claimed 5%.
If Musk’s assertions are correct, Twitter’s true value would be far lower than $44 billion. His $44 billion buyout offer was generous even in April. However, Twitter’s market cap has dropped markedly since then. At the time of writing, it sits around the US$31.8 billion mark.
The company’s value has rarely been above $30 billion since its initial public offering in November 2013, and pundits have often speculated on why one of the world’s most-used social networks has struggled to make money. Musk has been vocal on the issue and has claimed he has ideas that could turn Twitter profitable.
It has highlighted a large problem with the internet economy since the worldwide web began offering access to the masses in 1993. Most information published there is available for free, as are services for users to publish their own content. Paywalls and subscriptions have mostly been unsuccessful, and credit cards (currently the internet’s primary payment method) cannot process small or microtransactions immediately or at a reasonable cost. Many platforms have resorted to “data-mining” their users, who themselves became “the product”, selling their private and behavioral data to third parties.
There have also been accusations that news and social media platforms have engaged in heavy-handed censorship in recent years. Conversely, others claim these providers don’t censor enough, resulting in an “unsafe environment” for some.
Twitter trial set to begin in October 2022
Twitter’s Chancery Court action against Musk is set for a five-day trial starting on October 17, 2022. The court has the power to compel specific actions from parties when overseeing a case, often in contracted deal situations similar to this one.
Musk’s countersuit is also in Delaware, though not the same Chancery Court. His legal team requested details of the case remain confidential – it is unknown if any will be made public at any stage or even if the suit will lead to another trial.
Although the media has branded the suits as a “conflict”, it may be (as some have suggested) part of a strategy to either lower the sale price or force Twitter to reveal its inner workings in court. Musk’s countersuit could provide some leverage in negotiations.
Musk still very interested in Twitter
Of note, Musk has continued to post regularly on Twitter despite the tense legal situation. As well as his usual quirky insights and random thoughts, he’s also posted some thoughts on how Twitter works and what its place should be in the media space. It’s clear he has a strong interest in the platform’s future, suggesting he would still like to play a part in improving it.
“Interaction with almost all twitter accounts seem to be much lower in recent weeks & days. Accurate?” Elon Musk (@elonmusk) on July 30, 2022.
“It sure is hard to find a news source that’s accurate, relevant and not totally depressing!” he wrote. “Maybe Twitter can become that”.
Whatever the outcome of either suit, Musk may still eventually become either the outright owner of Twitter or a major shareholder. While that result would please some and anger others, it would likely cause a shakeup in how Twitter and social networks in general approach their business.