Of, by, and for the billionaires
Two weeks after a gunman murdered 21 people at a Texas elementary school, Texas Attorney General Ken Paxton (R) announced an investigation to "protect Texans." Paxton's investigation, however, has nothing to do with gun violence. Instead, Paxton will investigate Twitter for "potentially" misrepresenting the number of bot accounts on the platform.
Paxton's announcement is a transparent effort to curry favor with Elon Musk, the world's richest man. Musk recently agreed to buy Twitter for $44 billion and has been trying to renege or renegotiate the agreement, citing the bot issue. Paxton is deploying the resources of Texas to assist Musk — part of a growing trend of Republican elected officials using the power of the state to reward perceived allies and punish enemies.
On Monday, the same day Paxton announced his investigation, Musk's lawyers sent a letter to Twitter alleging that "Twitter has, in fact, refused to provide the information that Mr. Musk has repeatedly requested since May 9, 2022, to facilitate his evaluation of spam and fake accounts on the company’s platform." Musk alleges that the alleged refusal to turn over the data constitutes "a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction."
Musk agreed to buy Twitter for $54.20 per share prior to the recent market downturn. And now he is clearly having second thoughts. The bot issue appears to be a pretext to cancel or renegotiate the deal. After all, Musk "originally said that he wanted to buy Twitter in order to fix the bot problem."
Twitter has estimated in SEC filings that "false or spam accounts" account for "fewer than 5%" of daily active users. The prevalence of fake accounts does impact the value of Twitter. If many of the "users" of Twitter are fake, that makes the service less valuable in terms of potential advertising or subscription revenue.
But if Musk was concerned about Twitter's estimate, he could have conditioned the deal on receiving more information about potential fake accounts. Instead, Musk explicitly told the Twitter board that his offer was not contingent on the completion of "business due diligence."
Now, Paxton — who is himself under indictment on felony fraud charges — is trying to bolster Musk's negotiating position. Paxton asserts that "Twitter has received intense scrutiny in recent weeks over claiming in its financial regulatory filings that fewer than 5% of all users are bots, when they may in fact comprise as much as 20% or more." Paxton offers no evidence to support the 20% figure, which has been pushed repeatedly by Musk.
Paxton claims he is interested in spam accounts on Twitter because inflating the number of users increases "the costs of doing business with it, thus directly harming Texas consumers and businesses." Twitter, however, is free for Texas consumers to use. Texas businesses have many other ways to evaluate the effectiveness of their ads, including clicks and sales.
And if Paxton was truly concerned about the impact of fake social media accounts on Texans, why is he not requesting similar information from Facebook, Instagram, Snapchat, TikTok, and other platforms? The investigation only makes sense as a fishing expedition on behalf of Musk.
Paxton is demanding, among other things, "Documents that contradict Your public statements that fewer than 5% of 'false or spam accounts' are included in Your 'monetizable daily active users' metric." This is exactly the information that Musk is looking for as a pretext to reduce his offer or cancel the deal. Paxton has given Twitter just three weeks to respond to 23 detailed document requests.
Paxton's investigation into Twitter comes shortly after Musk declared he would start voting Republican. Musk has also begun blasting "woke" progressives, an attack Paxton has been deploying for years.
While Paxton's investigation is particularly brazen, he is far from the only Republican elected official wielding government power for Musk's benefit. It represents a reorienting of the state from the public good to the idiosyncratic needs of billionaires.
DeSantis threatens Twitter's board
In April, Florida Governor Ron DeSantis (R) said that the state of Florida was prepared to hold “Twitter[’s] board of directors accountable” for allegedly opposing Musk’s potential takeover.
A day after Musk announced his bid to purchase the company, Twitter adopted a “limited duration shareholder rights plan,” otherwise known as a poison pill. The new structure created the opportunity for existing shareholders to buy additional shares of the company at a significant price reduction “if any person or group acquires beneficial ownership of at least 15% of Twitter’s outstanding common stock without the board’s approval.” This would dilute the value of each share in the company, making it “a less attractive acquisition target.”
“I think that’s probably an injury to the fund, so we’re gonna be looking at ways that the state of Florida, potentially, can be holding this Twitter board of directors accountable for breaching their fiduciary duty,” DeSantis said at a press conference. Florida's state pension fund holds around 1 million shares of Twitter.
DeSantis alleged that Twitter “rejected [Musk’s offer] because they know that they can’t control Elon Musk,” arguing that Twitter “know[s] that he will not accept the narrative and that their little play toy of Twitter, it would not be used to enforce orthodoxy and to basically prop up the regime and these failed legacy media outlets.”
Ultimately, DeSantis did not get an opportunity to make good on his threats because Musk’s bid was accepted by the Twitter board. But DeSantis demonstrated his willingness to use the power of the state to help Musk.
House Republicans demand Twitter "preserve records" related to Musk deal
In April, CNBC reported that Republicans on the House Judiciary Committee sent a letter to Twitter’s board requesting that they “preserve all records” related to Musk's bid to acquire Twitter, suggesting House Republicans were prepared to investigate Twitter’s actions if they rejected Musk's offer.
The letter was signed by 18 House Republicans including Jim Jordan (R-OH), the top Republican on the House Judiciary Committee. The letter was "a formal request [to] preserve all records and materials relating to Musk’s offer to purchase Twitter, including Twitter’s consideration and response to this offer, and Twitter’s evaluation of its shareholder interests with respect to Musk’s offer.” The Republicans claimed this step was necessary as part of their examination of "Big Tech" and "how to best protect Americans’ free speech rights."
The letter, addressed to Twitter Board Chairman Bret Taylor, accused Twitter of “attack[ing]” free speech online and stated that “the Board’s reactions to [Musk’s] offer to purchase Twitter, and outsider opposition to Musk’s role in Twitter’s future are concerning.” The letter also argued that “[d]ecisions regarding Twitter’s future governance will undoubtedly be consequential for public discourse in the United States and could give rise to renewed efforts to legislate in furtherance of preserving free expression online.”
The letter “lack[ed] the legal heft of subpoena power to force Twitter to respond” as no Democrats signed the letter, but an inquiry could be pursued in the future if Republicans gain control of the House.