Hiltzik: The Musk/Twitter circus comes to Texas

If one chooses to take his hat off to the Republican leaders in the state of Texas, it is acknowledging their determination to distract voters from the most pressing issues of the moment.

Image A: Atty. General Ken Paxton. With funerals for 19 children and two adults killed by a gunman in Uvalde, Texas, still ongoing and expected to continue at least next week, Paxton has taken a hard line – on Twitter .

On Monday, Paxton announced that he had opened an investigation into whether Twitter lied about the rate of fake accounts or “bots” on its platform.

If Twitter misrepresents how many fake accounts it has to increase their revenue, it’s my duty to protect Texans.

– Texas Atty. General Ken Paxton

If you think this is an oddity for Paxton to pay attention to, you are not paying attention to the context, which is the percentage of bots on Twitter that has become a big problem for Elon Musk in his quest to get rid of terms of a $44 billion deal to acquire Twitter.

Musk made a big point when he moved the headquarters of Tesla, his electric car company, from California to Texas, receiving gratitude from Texas Governor Greg Abbott.

Abbott has said that Musk told him he “had to leave California, partly because of social policies” in California, and that Musk “always told me he liked the social policies in Texas.” “. Those policies include one of the most draconian anti-abortion laws and some of the laxest gun laws in the nation.

In May, Musk also said that he would vote Republican in the upcoming election, having previously voted Democrat. Abbott and Paxton are both Republicans.

Paxton isn’t the only Republican with an attitude on Twitter. The GOP has long warned that the platform has disadvantaged conservatives in its account-blocking practices; In April, a group of 18 Republicans in the House hinted that they would investigate the company’s dealings with Musk if they won a majority.

Paxton justified his greatness on behalf of Musk by asserting that Twitter’s “ability to misreport” of fake accounts may violate the Texas Fraudulent Commercial Practices Act. “If Twitter misrepresents how many fake accounts it has to increase their revenue, it is my duty to protect the people of Texans,” he said.

“Twitter has received intense scrutiny in recent weeks” for their claim that “less than 5% of all users are bots,” says Paxton.

A few points about that: First, “thorough scrutiny” comes from exactly one person, Elon Musk, who, as we will explain, may have an ulterior motive to raise the issue; Neither Musk nor anyone else offered evidence that Twitter was misleading about the fake accounts.

Second, Paxton was wrong to say that Twitter claimed that less than 5% of its total users were bots; Twitter said less than 5% of all “can make money“Users are bots, a category that excludes bots that it identified and took steps to remove the platform.

Third, Paxton has the guts to press charges of fraud against anyone. That’s because he himself is being accused of fraud, in a case that has been settled in the Texas court system for seven years without trial. He is also under criminal investigation by the FBI in a separate matter. He pleaded not guilty in the state case and said the FBI had nothing to investigate.

There’s no escaping the fact that Paxton’s foray into the Twitter affair has made Musk’s takeover even more of a circus than before. Let’s review the chronology.

The adventure began on April 4, when Musk revealed in a Securities and Exchange Commission filing that he had purchased a 9.2% stake in Twitter worth about $3 billion. He asserted in the filing that the purchases were designed as a passive investment and that he had no intention or desire to influence Twitter.

The SEC is investigating whether Musk misled investors with that filing and why Musk violated its regulations by delaying the official disclosure of his Twitter stock purchases. more than a week after I should have reported.

A day after Musk revealed his stock holdings, Twitter said he had agreed to join the board and limit future stock purchases. Musk then reversed himself, rejected the takeover, and on April 13 announced an offer to buy back all of Twitter’s outstanding shares at $54.20 per share, higher than their transaction price, or about $44 billion, and would then make Twitter private. The Twitter board approved the deal on April 25.

Agreement is binding except in very limited cases; Musk said he won’t be due diligence on the company – checking the target’s books and records to make sure there are no potential pitfalls or conditions that could hinder a successful takeover.

Since then, however, Musk has given numerous signals that he is feeling buyer remorse. He appears to be looking for an excuse to justify his bargaining for a lower price or abandon the deal altogether.

One reason could be that the Twitter bid contributed to Tesla stock’s slide, at least in part because Musk had planned to take out a loan to finance the bid, creating the possibility that he might have to sell his shares. votes for profit.

Tesla shares have fallen more than 36% since he announced his Twitter acquisition on April 4, and about 27% since the takeover was announced on April 25. At current prices of about approx. $730, they have lost more than 40% from their peak around $1,230 on Nov. 4 of last year.

Musk has tweeted attacking Twitter executives and company policies; it was a potential breach of a clause of the agreement that barred him from disparaging the company while takeover proceedings were underway.

More recently, he questioned Twitter’s estimate that less than 5% of “monetizable daily active users” are false or spam accounts – a number Twitter has revealed for years.

Musk asked for the opportunity to do his own analysis based on data he had requested from the company, but the company declined. Initially, Musk said that his doubts about the statistics had brought the deal “on hold,” even though it was a meaningless assertion under the terms of the deal.

On Monday, however, Musk actually downplayed the outburst on Twitter. In another SEC filing, he asserted that the company’s refusal to turn over the data he requested was a “clear and serious violation” of the takeover and could lead him to “terminate the merger agreement.” import”.

Twitter on Wednesday appeared to have called Musk a scam by giving him access to data from 500 million daily tweets posted on the platform, according to the Washington Post.

All of this undermined predictable confidence that the deal would happen. That was especially true among bankers who lined up to finance the takeover, who pointed to some difficulty finding investors for the loans they offered. for Musk.

That could indicate Musk’s true intentions, because one of the conditions that allowed him to leave was the lack of financing. If he abandons the bid without good reason, he could face a $1 billion fine, or even a court order that he closes the deal for the agreed price. favorable.

Wall Street investors voted with their feet on the deal on Musk’s Twitter. Twitter stock price, which should have converged with Musk’s $54.20, has never closed higher than $51.70, which it reached on the day the deal was announced. Since then, it has been trading as low as $35.40, 34.6% below the asking price, a staggering spread for a transaction that has not faced any regulatory hurdles. . At midday on Wednesday, Twitter was trading at around $40.50.

Musk’s plan to take over Twitter has become an act of demonstration, with speculation centered not on when he will close the acquisition, but on whether he will ever do it, how and with what. the cost he will walk away.

The whole incident became a lesson in how to undermine the financial transactional principles that have lubricated commerce for decades. Sadly, it’s no surprise that Elon Musk would stretch the limits of goodwill this way. Worse yet, it’s also not unsettling that Texas’ top legal official, at work while under criminal charges, will prioritize Musk’s whims over real crises in the industry. state.

https://www.latimes.com/business/story/2022-06-08/column-texas-ag-paxton-musk-twitter-fraud Hiltzik: The Musk/Twitter circus comes to Texas

Edmund DeMarche

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