The $TWTR bot issue is completely irrelevant to the Musk merger, and represents excellent opportunity
I am surprised at how many people think Musk will get out of the signed definitive merger agreement to acquire $TWTR just because Musk believes the bots are higher than Twitter says. I will provide a deductive argument as to why he is wrong.
Premise 1. TWTR makes no claim to absolute bot measurement; it's an estimate
From $TWTR SEC 10-Q:
We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the second quarter of 2022 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated. We are continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our mDAU and have made improvements in our spam detection capabilities that have resulted in the suspension of a large number of spam, malicious automation, and fake accounts. We intend to continue to make such improvements.
- the estimate is bot % of mDAU (monetizable Daily Active Users), not % of overall accounts
- the estimate is not an absolute guaranteed measure
- the estimate may be wrong
- the estimate is always being improved
- the estimate uses significant judgement
Premise 2. Elon Musk fails to mention that TWTR bot measurement is an estimate, and refers to them as an absolute claim
Multiple times on Twitter, in the media, on podcasts, and in his legal filings, Musk has lambasted the 5% bot measurement.
Musk fails to mention:
- he fails to mention that the 5% is an estimate
- he fails to mention that the 5% estimate is % of mDAU, not % of accounts (this confuses the denominator)
- he fails to mention that it is not possible to repeat the $TWTR process, which uses internal judgment data, without using internal $TWTR data and tools
Premise 3: When Musk signed the definitive merger agreement, he accepted all $TWTR SEC filings a proper and sound
In the SEC filings, Twitter mentioned details of the estimate (premise 1) that Elon fails to fully grasp (premise 2) yet he has legally accepted the caveats as sound
Premise 4: Musk's withdrawal from the signed definitive merger agreement relies heavily on improper bot premises
In his letter to $TWTR wherein he announced he was withdrawing from the legally binding, signed, definitive merger agreement, Musk repeatedly talked about the bot issue that he claimed Twitter has. However, given the caveats and warnings provided in SEC 10-Q by Twitter (premise 1), that Musk accepted as good and proper (premise 3), this was not a sound basis upon which to cancel the deal.
But things took a sour turn when Musk and his lawyers accused Twitter of withholding information about the number of “spam” accounts on the platform. This week, the company revealed that it was suspending more than 1m spam accounts a day.
Conclusion: the bot issue is moot
The reasons that Musk uses to exit the legally-binding merger agreement are completely moot, given he signed the agreement, and, in doing so, accepted warnings and caveats in the Twitter 10-Q that bot % of mDAU may be higher than estimate. Even if the $TWTR bot % of mDAU was 20%, the caveats and warnings in the SEC 10-Q still hold.
Elon Musk is bound to complete the $TWTR purchase for the full $44B, and unless he can come up with a convincing reason other than bots, it's going to happen.
I am long $TWTR
- 50/55 bull call spreads in $TWTR
- opportunistic $TWTR weeklies when price is good
- $TWTR shares
Rosenblatt, Hindenburg, and Greenbridge have so far agreed that Musk will be forced to complete the legally-binding, signed, definitive merger agreement, and have all taken long positions as well. There will be more firms coming soon.
Submitted August 05, 2022 at 06:26AM by thus
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