Elon Musk, in a new bid to bolster the claim that he has the right to walk away from his $44 billion bid for Twitter, issued a subpoena to Jack Dorsey, co-founder and former CEO of Twitter.
Through the subpoena, revealed Monday in a court filing, the world’s richest individual is hoping to turn up evidence Dorsey may possess about how the social company has measured bot and spam accounts.
Musk and Twitter are locked in a legal battle, playing out in Delaware Chancery Court, in which Twitter is seeking to hold Musk to the original buyout terms. Musk has argued in legal filings that Twitter has made “false and misleading representations” — including about the extent of fake and spam accounts on the service — which amounted to a material breach negating the pact.
In the subpoena served on Dorsey, Musk’s lawyers requested all documents and communications related to the tech billionaire’s deal buy Twitter as well as documents “reflecting, referring to, or relating to the impact or effect of false or spam accounts on Twitter’s business and operations,” dating back to January 2019.
The subpoena also seeks information pertaining to Twitter’s use of monetizable daily active users (mDAU) — a proprietary metric the company introduced with its Q4 2018 results — “as a ‘Key Metric,’ as noted in Twitter’s SEC filings.” Musk has criticized Twitter’s use of the mDAU metric, alleging that it doesn’t accurately reflect the advertising revenue generated from the social network’s user base.
Dorsey stepped down as CEO of Twitter in November 2021, after more than six years at the helm. Dorsey and Musk have been on friendly terms. After Musk inked the deal to acquire Twitter, Dorsey endorsed the move.
“In principle, I don’t believe anyone should own or run Twitter. It wants to be a public good at a protocol level, not a company,” Dorsey wrote in a Twitter thread in April. “Solving for the problem of it being a company however, Elon is the singular solution I trust. I trust his mission to extend the light of consciousness.”
In trying to line up financing for the Twitter takeover, Musk said in an SEC filing that he was having “discussions with certain existing holders” of Twitter stock, including Dorsey, to try to persuade them contribute their shares toward his bid. Dorsey owns about 18 million shares of Twitter, representing 2.3% of the company’s stock, per the company’s 2022 proxy statement.
Musk’s lawyers on Aug. 19 also served subpoenas on Kayvon Beykpour, Twitter’s former head of consumer product, and product revenue head Bruce Falck — both of whom were fired by CEO Parag Agrawal in May. Agrawal was previously Twitter’s chief technology officer before he took over for Dorsey.
After Musk sealed the $44 billion deal to buy Twitter on April 25, he began questioning Twitter’s longstanding estimates that spam and fake accounts are less than 5% of total active users.
On July 8, the Musk legal team informed the company he wanted to nix the deal over Twitter’s alleged inability to prove the metric and stonewalling in providing relevant data. In response, Twitter sued Musk on July 12 in the Delaware Court of Chancery, seeking to force him to consummate the binding pact to acquire the company. Lawyers for Twitter have argued in legal filings that Musk is looking for an excuse to bow out of the deal after his personal net worth fell with the drop-off in Tesla’s stock price.
The Delaware court has set Oct. 17 for the start of a five-day trial. It’s possible the parties will settle the spat before then.
