Twitter (TWTR), is not willing to be more forthcoming in its M&A due diligence process with Elon Musk because the company knows it has a Bot problem. Twitter knows that a 20-40% Bot problem will result in a similar haircut by Mr. Musk to the deal’s total purchase consideration.

• Twitter CEO Parag Agrawal is spinning a tall tale: When Twitter CEO Parag Agrawal states that the company can’t share PII (personally identifiable information), as part of the deal’s due diligence process because it is “privilged” information (See Mr. Agrawal’s Tweet below), he is full of that which makes grass grow green. There is no such thing as privileged information in a deal.
• Twitter is stalling: Twitter’s strategy is to hope Mr. Musk will drop his request to verify Twitter user accounts. Mr. Musk would be a fool to do so, for he would risk significantly overpaying for the asset should Twitter in fact have a Bot problem as we believe it does. Twitter may securely share PII and other account information with a select group of people on Mr. Musk’s team using a virtual data room as every other deal team does when in-process on large M&A transactions.
• Twitter as a social media contagion: As we previously wrote, we believe social media companies in general have a Bot problem. Twitter coming clean on its user data and exposing its Bot problem would act as a contagion to other social media companies and adversely impact their valuations including Facebook (FB), TikTok, Snap (SNAP), Pinterest (PINS), and others.

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