Elon Musk Isn't Buying Twitter
The inside story behind the billionaire's apparent decision to leave the social network at the altar. Insiders believe there is almost ZERO chance this deal will close.
Over the past forty-three days, it has become clear to Elon Musk that Twitter is one of the worst run, most dysfunctional public companies in America. It has been said that if Twitter was a person they would be diagnosed with narcissistic personality disorder presenting with overwhelming arrogance, and algorithmic manipulation wrapped in vomitous condescension. Having only recently escaped nuptials with a victim of borderline personality disorder, Elon is rightly reluctant to tie the knot with a similarly inflicted Twitter. In this article, I’ll share the inside story of why Elon there is almost ZERO chance Elon will buy Twitter as told by a handful of well-placed sources.1
Author’s Note: To be clear, while Elon continues to insist he intends to complete the transaction contemplated in the Merger Agreement2 my sources are telling me that the billionaire isn’t willing to close the deal on the present terms and he’s not going to renegotiate. The only way, according to my sources, that Elon would consider moving forward is if Twitter comes to the table and proposes new terms. Elon hinted at this during an interview at a Miami Tech conference yesterday.3 Elon wasn’t caught off guard by the massive number of bots on Twitter - he is simply using Twitter’s dishonesty against them. Just this morning Elon called on the SEC to investigate Twitter (not the sort of thing someone planning to close a transaction would be doing):
This article represents an opinion - shared by myself and other Twitter insiders and watchers - based on both public and private evidence. I have attempted to include as much 3rd party coordoboration as possible but at the end of the day only one person knows exactly what he intends - Elon Musk.
ENTITLEMENT REIGNS SUPREME
Despite watching Twitter’s mismanagement for years Elon Musk always remained a huge fan of the company and a prolific user. He had assumed that after burning through billions of dollars and losing money for eight of the last ten years the team might have acquired a modicum of humility. He was wrong. Twitter’s inflated sense of importance belies a sense of entitlement that permeates every level of the organization. The Twitter management team is one of the most highly compensated groups of people on the planet and yet they don’t seem to feel any sort of obligation to the shareholders of the company. Instead of focusing on building a business they’re almost exclusively focused on advancing their own social and political agendas.
In fact, Twitter compensates its employees as if it was a much larger company operating flawlessly. For example, Google generates more than $270 billion in revenue and a pre-tax profit of $90 billion and pays its CEO, Sundar Pichai, $7.4 million per year. On the other hand, Twitter only generates $5 billion in revenue and a pre-tax loss of $411 million and yet Parag Agrawal received a very lucrative compensation package worth $30 million.4 This compensation package is even more shocking when you realize that prior to joining Twitter, Parag only held a handful of short-term research positions (ATT - 4 months, Microsoft - 8 months, and Yahoo - 16 months) with no management experience.5
Parag isn’t the only employee getting unimaginably wealthy at Twitter. Vijaya Gadde, Twitter’s Chief Legal Officer, has sold stock in the company over the years worth over $57 million6, receives annual comp in excess of $7 million7, and received a $10 million stock grant the day after Elon Musk made his formal offer to buy the company. Shortly after Gadde voted to approve the sale of the company to Elon Musk she held an all-hands meeting where she broke down and openly wept as she expressed fears that Elon would put the lives of women and minority groups on the platform in grave danger.8 Gadde, considered the company’s “moral authority”, is said to have privately advised Black and LGBTQAI+ employees to prepare for the worst should Elon take control of the company.
Elon was shocked by just how untethered employee expectations and compensation are relative to the overall performance of the company. It isn’t clear to Musk that ANYONE is worried about the financial success of the company. In fact, the consensus of the employee reviews on Glassdoor reveals that hard work isn’t required to succeed at Twitter. Employees indicate they appreciate the company’s four-day, remote workweek, commitment to DEI, and flexible vacation policy that allows for extended 2-3 month escapes from the tedium of work.9
If you’re still not convinced just watch this undercover interview with a senior engineer from Twitter:
Or this undercover interview with a lead client partner from Twitter:
FWIW - Twitter is so concerned about employees sharing these sorts of details that they sent out this warning to staff:
FORTRESS TWITTER • PREPARING FOR A SIEGE
After Parag Agrawal learned Elon Musk was accumulating Twitter shares he huddled with his top lieutenants, Kayvon Beykpour (General Manager) and Bruce Falck (Revenue Lead), reassuring them that he and the board would stop the billionaire at any cost. Kayvon and Bruce convinced Parag that the only way to prevent a mass exodus was to pay employees to stay and fight. While Parag worked with the board on employee retention packages, the pair began amplifying preexisting suspicions and fears about the straight, white, male, billionaire raised in apartheid-South Africa. The messaging was clear - Elon Musk represents a clear and present danger to democracy in the world and Twitter’s employees were democracy’s last line of defense.
The day after Elon Musk formally offered to buy Twitter for $41 billion10 Parag convinced the board they would need to issue millions in stock to key members of the team to fund the fight against Elon and his plan to restore dangerous free speech to the social network. Parag insisted that Kayvon and Bruce receive almost $12 million each in stock in exchange for their loyalty and support.11 12
Twitter’s comms team went to work planting anti-Elon stories with sympathetic media outlets including Salon (suggesting Elon’s purchase of Twitter would enable fascism in America)13, Forbes (claiming Elon would institutionalize hate speech, violence, and incitement)14, and CNN (claiming a Musk-owned Twitter would open the gates of hell)15. Twitter’s public policy and legal teams convinced the Biden administration to open up DOJ, FTC, and SEC investigations into Elon Musk.16 They even convinced the European Union to comment on the deal warning Elon that he would face significant pushback if he planned to take control of the platform and begin allowing free speech.17
Then just nine days after paying Kayvon and Bruce almost $12 million each and other key members of Twitter’s team billions more, Parag and the board recognized that refusing Elon’s offer would likely be a violation of their fiduciary duties. Twitter’s CFO had informed them that the company would have to report that it had missed Wall Street’s revenue expectations on the following Thursday18 and Goldman Sachs was making it clear they believed the offer was very attractive and that Musk had secured financing to close.19 Under pressure from major investors, their lawyers, and their financial advisor the board believed they had no choice but to accept Elon’s offer on 24th announcing the deal to the company on the 25th.
It would be an understatement to say that Kayvon and Bruce were crushed by the news. Parag had assured them that the board was going to stop Elon from taking over the company. They were well versed in the nuances of the company’s “limited duration shareholder rights plan” aka poison pill and were very confident that Elon could be stopped.20 Just days after the pair had staked their reputations on the impending battle royale, Parag had pulled the rug out from under their feet. Parag, for his part, believed he had more than earned Kayvon and Bruce’s loyalty and assumed they would understand his decision.
While the lawyers buttoned up the merger agreement21 and the communications team wrote the press release22 the product team was frantically deciding what to do about the code. The company’s top-secret algorithm23 had been ‘tuned’ starting in the Trump administration to focus on a concept called ‘health’ - a tactic focusing on the intent and/or effect of discourse on the platform. If the intent/effect of a particular line of discourse is perceived by the Twitter team as harmful or disruptive the ‘tuned’ algorithm would minimize its distribution. Humor and sarcasm make this sort of intent-based filtering very hard so Twitter created ‘threat tags’ that the company’s human moderators could assign to, particularly influential users. Similarly, they created ‘equity tags’ that would amplify underrepresented voices. Team members called it ‘affirmative action’ for speech.
THE ALGORITHM COVERUP
Twitter realized that once the sale to Elon was completed their efforts to improve ‘health’ would be exposed to the world and its impact (not intent) would be the focus of the story. The fact of the matter is that according to the FEC more than 90% of the company’s employees are registered Democrats and underrepresented communities like LGBTQ are overrepresented among Twitter’s ranks (Twitter employees identify as members of LGBTQ more than 10X the overall population).24 Inside Twitter anyone who shared views supporting President Trump, Justice Barrett, or Justice Kavanaugh was, by definition, responsible for creating an unhealthy environment. On the other hand, anyone promoting Ibram X. Kendi25 and his anti-racist views was working to promote a healthy environment. The mantra was ‘more Kendi, less Trump’.
When twitter designed its algorithms it didn’t set out to be discriminatory but over time the company’s computer code began reflecting the social preferences of its employees eventually embracing their biases favoring leftwing worldviews. Inside Twitter, this was seen as a positive byproduct of ‘health’ but there was a concern, that once the world learned how the company’s computer code worked, critics would focus exclusively on the outcome - the wholesale censorship and suppression of America’s so-called conservatives. The decision was made to roll back the Trump-era tuning including user-specific threat and equity tags to protect the company and its employees from the myopic criticism sure to ensue after Elon took control of the company.
Twitter’s developers did not take the news that they would have to erase much of the code they wrote to improve ‘health’ well at all. In fact, they weren’t willing to simply change the company’s source code, they wanted to, no, needed to, make a statement of opposition that Elon Musk would understand. To that end, they decided to set up a new public source code repository on Twitter’s GitHub platform called ‘the-algorithm’26 but they left it empty as a signal to Elon Musk that he was NEVER going to get to see their code much less make it open source.27 In essence they were mocking the billionaire and his plan to open source the code that kept users safe from unacceptable views at the same time they were hiding the changes they had made to the algorithm.28
Once the board became aware that Twitter employees were deleting massive chunks of the company’s algorithm and publicly trolling Elon Musk, Parag was forced to step in and lock down the code from both well-intentioned and disgruntled employees.29 Parag was especially disappointed with Kayvon and Bruce for embarrassing him in the eyes of the board and undermining any sort of trust/rapport he was building with Elon Musk. The public repository was deleted but the damage was done.
Neither Kayvon nor Bruce made much an effort to hide their contempt for Elon Musk in public. Even the most cursory review of their Twitter timelines reveals a bitter hatred of Elon Musk and a contemptuous view of free speech proponents. While Parag was aware of their feelings he erroneously believed they would get on board with his plan and help close the deal with Elon. Kayvon and Bruce felt betrayed and were so angry it is very likely they didn’t realize how hurt Parag really was.
Fortunately for Kayvon, his wife had given birth to a baby the day before Elon’s 9% ownership stake was made public so he could focus on his paternity leave allowing him to ignore what he saw as a betrayal by Parag. Bruce, on the other hand, was not taking the about-face well. Bruce is an outspoken antiracist and supporter of women. He often wears political t-shirts with messages like “the future is female”30 and is known to openly share his emotions comfortably crying with his staff.31 Needless to say much of Bruce’s days were spent spreading fear, uncertainty, and doubt about Elon Musk throughout the organization. Today a majority of Twitter employees are convinced that Elon is a neo-nazi32 misogynist hell-bent on the establishment of a fascist police state.
ALGORITHM CHANGE • FALLOUT
In the days following Parag’s decision to lockdown Twitter’s source code the impacts of the algorithm changes made on April 25th were simply too massive to cover up. Conservatives who had been handicapped with so-called ‘user tags’ immediately began noticing big increases in engagement after they were removed. Most conservatives saw MASSIVE increases in the number of people seeing their tweets resulting in a LOT more ‘likes’ and ‘retweets’.
Engagement on Twitter is zero-sum meaning if tweets from conservatives are organically receiving more views, likes, and retweets; liberal users would see a corresponding reduction in views, likes, and retweets. The net effect of expanded reach and engagement is an increase in followers as people who see your content decide they want to see more of your content in the future. Sure enough conservatives between noticing that as their reach and engagement increased their follower counts were growing.
For example, Rep. Marjorie Taylor Greene saw her 480,000 Twitter followers as of April 1st spike to 675,000 two days after the algorithm changes were made on April 25th - today on May 15 she has more than 850,000 Twitter followers - almost a 100% growth rate in just over a month. Other conservatives saw big increases in followers including:
Lauren Boebert - 350,000 additional Twitter followers
Dinesh D’Souza - 200,000 additional Twitter followers
Dan Bongino - 200,000 additional Twitter followers
Jim Jordan - 400,000 additional Twitter followers
Laura Ingraham - 300,000 additional Twitter followers
Kayleigh McEnany - 200,000 additional Twitter followers
Donald Trump Jr. - 700,000 additional Twitter followers
Tom Fitton - 200,000 additional Twitter followers
Matt Gaetz - 200,000 additional Twitter followers
The Verge33 did some good data analysis of 50 conservative accounts impacted by the algorithm changes and published their findings on Github.34 Their data support the conclusion that changes to the algorithm dramatically increased engagement with conservatives on Twitter.
Another consequence (likely unintended) of artificially suppressing conservatives on Twitter is the fact that bots were FAR less likely to like, retweet, or follow conservative accounts than liberal accounts. This means that over time more and more bots targeted liberal Twitter users because they were more likely to see their content and their content was more likely to be liked/retweeted making them more attractive targets. Just take look at the results of a Twitter audit tool like Twitter Audit.35 In general, more than 90% of the users who follow conservatives are ‘real’ while liberals are followed by far more fake/bot accounts with real followers in the 51-86% range.
MUSK STARTS ASKING QUESTIONS
When Elon Musk offered $54.20 a share to buy 100% of Twitter’s outstanding shares the deal was valued at $41.39 billion.36 The very next day Twitter issued employees millions of dollars worth of stock as they planned to stop Elon from buying the company by adopting a “limited duration shareholder rights plan”. Fearing Elon might dump his shares into the open market Goldman Sachs reached out to every possible alternative buyer and received ZERO interest.37 The board then received a document preservation order from members of the House Judiciary Committee ordering them to preserve all records and communication related to Musk’s offer to purchase the company.
When the board finally agreed to accept Elon’s offer they were forced to reveal to the billionaire that the day after he offered $41 billion for the company they had issued almost $3 billion in stock to various people including $24 million for Parag’s top two lieutenants Kayvon Beykpour and Bruce Falck. Parag insisted that Elon pay Kayvon, Bruce, and the other key employees cash for their restricted shares after he took control of the company. Elon knew that Kayvon and Bruce were telling employees that he was a white nationalist who remembered growing up in apartheid-South Africa fondly yearning to ‘Make America Great Again’.
Once Elon agreed to swallow his pride and agreed to reward Kayvon and Bruce’s alleged slander to the tune of $24 million, the company dropped a second bombshell. The board would not allow Elon to make the deal contingent on customary due diligence. He would have to take them at their word. Reluctantly, Elon agreed in exchange for a reduction in the breakup fee to just $1 billion - a shockingly low number that has caused more than a few observers to assume the deal wouldn’t close.38
In the days that followed it was clear to Elon’s team that Twitter was playing games with its algorithm. One day after Twitter’s employees learned about the deal conservatives who had accused the company of shadowbans, suppression, and censorship saw their impressions, likes, retweets, and follower counts skyrocket.39
In response, Parag locked-down Twitter’s source code announcing that no further changes would be allowed until the deal closed. Two days after that Twitter released a disappointing quarterly report that featured missed revenue targets and a massive operating loss. Buried inside was an admission that, for three years, the company had been overstating the number of users by millions.40 Of course, this wasn’t the first time Twitter has struggled with counting users. Four years ago the company admitted it had been overstating users for another three years.41 So for six out of the last seven years, Twitter admits it has misled investors and advertisers about the number of users the site has.
After Twitter announced it had overstated the number of users and speculation surrounding the massive increase in engagement on conservative accounts had exploded, Jared Birchall42, Elon’s consigliere began digging into Twitter’s data. Companies like Bot Sentinel are claiming that a massive percentage of new followers on conservative accounts don’t “appear to be legitimate.”43 Was Twitter’s algorithm allowing bots to increase influence through engagement on liberal accounts while suppressing them on conservative accounts? Birchall began wondering just how much control and understanding Twitter had over the millions of bots on its network.
Twitter has repeatedly claimed they have around 17 million bots on the platform representing about 5% of users. In their public filings Twitter uses this legalese44:
…this estimate is based on an internal review of a sample of accounts and we apply significant judgement in making this determination. As such, our estimation of false of spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have currently estimated.
Jared asked Twitter to provide details about their ‘internal review’ of monthly daily active users (mDAU) and the response from Twitter was surprising - the company admitted that it estimated the number of false or spam’ accounts on its platform by taking a random sample of 100 accounts. Elon wasn’t buying Twitter’s response. Surely they had a MUCH more sophisticated understanding of bots and their impact on their platform.
While Elon’s team was crunching numbers Twitter notified Jared that it was firing Parag’s top two lieutenants, Kayvon Beykpour and Bruce Falck, backfilling their roles with Jay Sullivan. Parag claimed that he was firing the pair for their failure to meet audience and revenue growth goals though Musk was hearing other rumors as well. When Musk learned of the firings he ALSO learned that he would still have to pay Kayvon and Bruce the $24 million Parag had promised them but he would have to do it immediately and not over a period of years as their terminations triggered an accelerator.
So on the day of close Elon Musk would have to write the following checks to people to NOT work at Twitter:
Kayvon Beykpour -$12 million
Bruce Falck - $12 million
Vijaya Gadde - $22 million45
Parag Agrawal - $42 million46
With the country on the brink of recession47, a stock market in freefall48, Tesla shares declining almost 30%49, concerns about Twitter’s disclosures and data, and the fact Elon would be paying employees more than $100 million NOT come to work, the billionaire sent out this tweet:
Then, in classic Musk fashion, he explained how Jerad would confirm or debunk Twitter’s claim that spam/fake accounts represent less than 5% of users in this tweet:
The billionaire was immediately criticized by 1,000s of users for his failure to understand statistics and appropriate sample sizes (here are a just a few):
Then Elon revealed that he was simply using the methodology and sample size Twitter uses to support their claim that less than 5% of users are fake/spam accounts.
It was right about that point that the team at Twitter lost their proverbial shit. The fact that they rely on a sample size of 100 to base their public claims about the percentage of fake accounts was something they did not want disclosed. Ironically, most people didn’t believe Elon’s claim that the company used a sample size of 100 to calculate the number of bots on the platform.
…until Twitter’s legal department called to complain that revealing that Twitter’s bot check sample size was 100 was a violation of his NDA with the company.50
Last night Elon claimed that he has yet to see any analysis that supports Twitter’s claim that less than 5% of their accounts are fake/spam. In fact, Musk claimed that he had seen some analysis that many as 90% of daily active users may be bots.51
Yesterday Elon Musk threw down the gauntlet when he conditioned closing on the deal on Twitter being able to prove fake/spam accounts are less than 5% - a task he knows they are both unwilling AND unable to complete.
At the end of the day, it simply makes ZERO financial sense for Elon Musk to risk his fortune to save Twitter. While many of us would love Elon to buy Twitter it really isn’t fair of us to expect him to do so. Twitter doesn’t want to be saved. Twitter doesn’t realize it has a problem. As of today, there is ZERO chance Elon Musk will close on this deal in its current form. Of course, anything is possible…
PRIMARY SOURCE DOCUMENTS
CASE SCHEDULING ORDER
MOTION TO EXPEDITE
3rd PARTY SUBPOENAS
Wondering if Elon will have to pay Twitter a $1 billion breakup fee? Check out my discussion here:
Author’s Note: While much of this article is based on publicly available sources, details about Twitter’s algorithm, source code changes, and interpersonal dynamics between Parag, Bruce, and Kayvon are based on several sources sharing their stories confidentially. I have longstanding relationships with some of the sources and I believe their recollections of events are accurate; however, there is a possibility they are misremembering certain events or details OR simply misleading me. Please take into account that I have ZERO personal knowledge of these events and/or people.