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In the ongoing no-holds-barred one-upmanship between Elon Musk and Twitter, peripheral actors in this soap-worthy saga are also gaining quite a lot of prominence. One such actor is the CEO of Morgan Stanley, James Gorman, who is now under the public glare for endorsing Elon Musk’s original bid for Twitter in glowing terms.
While the formal legal battle between Elon Musk and Twitter is set to take place over a 5-day period starting on the 17th of October, the ongoing pre-trial proceedings at the Delaware Court of Chancery have raised two major hurdles for the CEO of Tesla.
First, Twitter’s legal team disclosed earlier this week that the two independent experts appointed by Elon Musk to gauge the quantum of bots or fake accounts that populate the social media platform actually negated the claims made by the CEO of Tesla, who at one point had claimed that as much as 90 percent of the engagements on Twitter might have been bot-driven. Specifically, Cyabra and CounterAction have now concluded that the quantum of fake accounts on Twitter was 11 percent and 5.3 percent, respectively, in early July.
But there is more. Twitter uses monetizable Daily Active Users (mDAUs) as its key criterion to gauge user growth. The problem is: this metric is very arbitrary and fuzzy. Just look at the way Twitter defines this metric:
“[All] people, organizations, or other accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com, Twitter applications that are able to show ads, or paid Twitter products, including subscriptions.”
So, anyone who can potentially see ads or paid Twitter products, but not necessarily the ones actually shown such ads/products. See the problem here. How can anyone possibly quantify this legal mumbo jumbo?
Musk:
Defendants alleged mDAU as a metric disclosed to investors and 10-k's, over other metrics that better reflected the health of the company, including UAM.
36/
— The Chancery Daily (@chancery_daily) September 27, 2022
The core of the problem for Elon Musk is this deliberately vague standard that Twitter uses to quantify its user base. And the result is obvious to everyone. In recent pre-trial proceedings, Elon Musk’s lawyers have sought to play down the mDAU metric and focus on others, including UAM.
Musk:
[really pushing on this "mDAU isn't actually a key metric and we think proving that it wasn't the best choice could impact this case" argument]
37/
— The Chancery Daily (@chancery_daily) September 27, 2022
The second problem that Elon Musk is now facing relates to the allegations by Twitter that the CEO of Tesla withheld certain private communications. For instance, Musk’s legal team had failed to furnish his back and forth correspondence on the Signal app with investor Marc Andreessen in April. These messages were only discovered when Andreessen sent a screenshot of the correspondence to other Musk aides. While conceding their fault, Musk’s legal team recently ascribed this oversight to the speedy nature of the trial rather than a concerted effort to hide material facts.
Moreover, Twitter has also accused Elon Musk of failing to furnish the text messages with the CEO of Morgan Stanley, James Gorman, as well as Oracle’s Larry Ellison.
Texts from Morgan Stanley’s CEO calling Elon Musk a rocket ship the day he announced his deal to buy twitter 🚀🚀 https://t.co/H85K0TyD7T
— Lauren Hirsch (@LaurenSHirsch) September 29, 2022
To this end, a screenshot of the conversation between Gorman and Elon Musk recently went viral. As you can see in the messages embedded in the tweet above, Gorman called the CEO of Tesla a “rocket ship” on the 25th of April when Musk first officially declared his intention to take Twitter private.
Of course, with Elon Musk now trying hard to wriggle out of a legally binding agreement to acquire Twitter at a nosebleed valuation, we doubt that the CEO of Morgan Stanley would be as effusive in his praise for the CEO of Tesla. Meanwhile, the drama continues.
