In an interview, Barton Crockett of Rosenblatt Securities said that Elon Musk, “doesn’t have a leg to stand on,” in his legal battle with Twitter. He went on, “After a careful reading of Twitter’s lawsuit against Elon Musk, we flipped our view. We were formally skeptical about Twitter, now we’re skeptical about Elon’s position.”
Twitter is suing Elon Musk in Delaware over his withdrawal from their agreement for him to buy the social media giant for approximately $44 billion. Musk alleges Twitter has refused to supply him with the data he requires to confirm that the percentage of users who are non-monetizable spam/bot accounts is less than 5%, as Twitter alleges. Twitter alleges it has supplied him with all the data they can possibly give him without sacrificing user privacy.
Crockett continued, “We do think that Twitter is likely to get some success in court. They’ll likely to be able to use that as leverage for a settlement with Elon for close to the agreed deal price.”
Musk’s offer to buy Twitter was to purchase all outstanding shares at $54.20 per share. There is speculation his withdrawal might be part of a bargaining strategy to lower the price, now that Twitter stock has dropped, and the overall market is in decline.
Crocket said, “What we concluded after reading Twitter’s filings is that Twitter has been making very reasonable efforts to fully disclose the way it calculates [spam bots], the way it explains this to Elon. That flips the side of credibility to Twitter and away from Elon.”
He went on, “Elon’s only way to get out of this deal, and the way this deal is structured is if he can successfully assert that essentially Twitter has been fraudulent. We don’t think Elon has a leg to stand on.”
Earlier in the week, Twitter Chairman Brett Taylor tweeted that the social media company would, “hold Elon Musk accountable to his contractual obligations.”
Crockett meanwhile raised his rating on Twitter’s stock, from Neutral to Buy, increasing his price target from $33 per share to $52.
There is however one potential dark horse lurking in the shadows of the Twitter legal case. If Elon Musk can prove Twitter’s analysis of bots is incorrect, everything will change. And there may be a simple way to do that technologically.
Unlike most cases where Musk will tweet back at someone with an interesting tweet publicly, Musk was uncharacteristically silent in response to the tweet.
There is a possibility the billionaire could have an ace up his sleeve going into court, in the form of this data. If so, and he could show Twitter’s analysis of its bot issue is incorrect, he will win his case completely and be able to walk away from the deal.
The damage done to Twitter would depend on just how extensive such data revealed the bot problem to be. Either way, it is unlikely Twitter would see any other potential buyers, after such a debacle, and it would likely lose significant advertising revenue as well, as advertisers would not want to pay the company money to present ads to bots who will not purchase goods or services.
And if it were to come out Twitter’s bot analysis was not just incorrect, but was in fact fraudulent, it could open company officials to criminal action from the SEC over fraudulent company filings.
Everything in the case will depend on whether the billionaire tech CEO avails himself of the geolocation tracking data, and just what that data shows.
Either way, Twitter is probably not a certain Buy just yet.
