Elon Musk may have gotten a head start in his effort to back out of the Twitter buyout thanks to a tip-off from the company’s former head of cybersecurity.
- The claim alleges that Twitter misled regulators about its privacy and its ability to detect and remove fake accounts.
- The social media platform is suing the billionaire over his efforts to walk away from a $63.7 billion takeover.
- Musk has spent months claiming that Twitter underestimated his spam accounts
Tesla’s billionaire CEO has spent months claiming that the company he agreed to buy for $44 billion didn’t count his fake and spam accounts, and that he shouldn’t have to consummate the deal as a result.
Now, a complaint from Twitter’s former security chief that alleges the company misled regulators about its privacy and security protections, and its ability to detect and remove fake accounts, could play into Musk’s hands in an upcoming trial scheduled for on October 17 in Delaware.
Musk’s legal team has, in fact, already issued a subpoena for the whistleblower, Peiter Zatko, also known by his hacker name “Mudge,” who served as Twitter’s head of security until he was fired earlier this year.
Alex Spiro, a lawyer representing Musk in his efforts to back out of the Twitter purchase, said the legal team “found his departure and that of other key employees curious in light of what we’ve been finding.”
The disclosure of the Mudge document changes the dynamics of Twitter’s lawsuit from what appeared to be an easy win for Twitter, Wedbush analyst Dan Ives said in an interview.
“For Musk, it’s almost like a kid waking up on Christmas morning and seeing this under the tree,” he said.
“It gives the Musk camp a leg to stand on as it enters the court battle.”
The whistleblower complaint reinforces Musk’s claims on the spam bot issue and will bring more attention to it in Washington, Ives said.
“For the Twitter board, it’s their worst nightmare that this happened at such a critical time.”
But Ives called the timing of the complaint “extremely interesting” just weeks before the Delaware trial.
Twitter called the complaint “a false narrative” about the company and its privacy and data security practices “that is riddled with inconsistencies and inaccuracies and lacks significant context.”
In an emailed statement, the company said Zatko’s “accusations and opportunistic timing appear to be designed to attract attention and inflict harm on Twitter, its customers and shareholders.”
However, some experts see the whistleblower revelation as little more than good optics for Musk.
While it gets plenty of headlines, it probably won’t change what is likely to be a Twitter victory in its lawsuit demanding Musk go ahead with the purchase, said Erik Gordon, a University of Michigan law and business professor.
That’s because Musk knew about and complained on Twitter about the number of fake “spam bot” accounts the company had on its platform before signing the deal, Gordon said.
To void the purchase contract, Musk has to show a “material adverse change” in the company, a change so big that it would make the deal look nothing like what Musk negotiated, Gordon said.
“You can’t say you were cheated on. You can claim that the complainant said, ‘Hey, Elon, you were right.’ It hurts Twitter but doesn’t help Musk much.”
Gordon, who has taught mergers and acquisitions law, said the Delaware Court of Chancery doesn’t normally let people walk out of deals if the circumstances don’t go their way.
He has ordered contracts to be executed in the past.
Mudge’s disclosure, he said, could give Twitter’s board some cover to agree to a deal without Musk buying the company.
But he expects any deal to exceed a $1bn break fee in the contract.