Twitter shareholders drag Musk kicking and screaming to the altar

It is not always easy to discern the real from the computer-generated in Amazon's Tolkien fest The Rings of Power, whose season-one budget of nearly half a billion dollars could have been shouldered only by an Internet giant. For Elon Musk, evidently no fan of the show, the same observation can be made of Twitter. "Tolkien is turning in his grave," he tweeted on September 5 after presumably sitting through an hour of elvish antics. "And 90% of my comments are bots," he cheekily added.

The question of how many tweets are software-generated, and not tapped out by a real person, has now become a legal matter as Twitter attempts to force the Tesla billionaire into an expensive marriage. Shareholders this week voted in favor of a $44 billion takeover by Musk, who reneged on that April 14 offer after Twitter's value had plummeted by nearly $6 billion. On July 8, when the company's market capitalization had sunk to less than $28.4 billion, Musk said he would not be consummating the deal. Closer investigation revealed that Twitter was infested with spam bots and that company managers were covering it up like restaurateurs hiding a cockroach problem. Or so Musk would have markets believe.

Figure 1: Twitter's bumpy share price ride ($) (Source: Google Finance)

The situation is nothing short of bizarre. Having set out to buy Twitter and supposedly make it a paragon of free speech, Musk is now being dragged to the altar by managers who seemed to resist his initial approaches. On both sides, the U-turns are probably explained by Twitter's dwindling value and uncertain prospects rather than any other considerations.

Ironically, all Musk's griping about spam bots is likely to have made shareholders even more intent on forcing him to pay up at the agreed price. Twitter is currently worth about $32 billion, and its share price has dropped by 46% since reaching a high point in February last year. Musk's insistence that millions of accounts are essentially fake is unlikely to spur any recovery.

Die trying

The prevalence of spam bots might be justification for renegotiating the deal, but it is not a very convincing reason for Musk to walk away from it. He has reportedly said 20% of accounts are bots, much higher than Twitter's estimate of 5%. Either way, Twitter is a social media pygmy. Based on its end-of-June customer numbers, it would have between 190.2 million and 225.9 million daily active users, depending on whose estimate is nearer the truth. In other words, it is between 9.7% and 11.5% of Facebook's size. If the technology overhaul Musk promised can exterminate the spam bots, what difference does that really make? On April 21, he was tweeting that "if our Twitter bid succeeds, we will defeat the spam bots or die trying!"

Far likelier is that spam bots are a pretext for avoiding a costly splurge on a business now turning mouldy. After reporting a small revenue decline of 1% for its June-ending quarter, to about $1.18 billion, Twitter swung to a $270 million loss, having reported a small profit of $65.6 million a year earlier. As social media evolves, new players crawl out of the Internet slime and Facebook shapeshifts for the metaverse, Twitter looks stuck in the past. Perceived as too woke by free-speech advocates, and accused of being too permissive by some on the left, it attracts more negative publicity than good vibes. And Musk's plan to be less censorious was not well received by the Twitter faithful, as he will have been aware.

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But he might yet have to pay, depending on what the law courts decide in October. In Musk's corner is Pieter Zatko, a former security chief turned whistleblower who claims Twitter has been misleading the public over the security of its platform. As Zatko gave testimony before the US Senate this week, an exposé by Ronan Farrow of the New Yorker revealed that many of Zatko's former colleagues have been offered money to reveal information about him. The natural suspicion is that Twitter has gone to extreme lengths to discredit its former employee.

"Almost every male character so far is a coward, a jerk or both. Only Galadriel is brave, smart and nice," typed Musk in his Twitter rant about The Rings of Power. Like that show, the Musk-versus-Twitter saga is likely to be expensive and long-running. And no one is emerging from it with any Galadriel-like qualities.

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— Iain Morris, International Editor, Light Reading