Elon Musk’s Twitter deal draws investor suit over spam account claims

By Jef Feeley

A Twitter Inc. shareholder wants a judge to force the social-media platform to hand over internal files about spam and fake accounts that have become a hot-button issue in billionaire Elon Musk’s $44 billion buyout of the company.

John Solak, who owns five Twitter shares, sued the company in Delaware Chancery Court Tuesday for records related to discussions between its directors and executives about problems with so-called bot accounts.

Musk, co-founder of electric-car maker Tesla Inc., said this week that Twitter is violating the terms of his $54.20-per-share offer by refusing to give him more information about how much of the platform’s traffic is driven by fake accounts. He’s threatening to blow up the deal over the issue.

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“Stockholder’s purpose in seeking these books and records is to investigate the possibility of board-level breaches” of legal duties to investors over directors’ failure to properly oversee public disclosures of the bot numbers, according to the complaint.

Representatives of San Francisco-based Twitter didn’t immediately respond to an email message seeking comment on the suit.

Twitter is incorporated in Delaware, home to more than 60% of Fortune 500 companies. Investors often sue in Delaware to gain access to files of companies incorporated in the state to collect information that can be used in lawsuits against firms or directors. They have to show a proper purpose for accessing the files, however.

Musk has seized on the fact that in regulatory filings, Twitter reported fewer than 5% of all users are bots, while they may make up as much as 20% of the company’s audience. He’s demanding more information about those accounts.

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In his suit, Solak also wants files about discussions between Twitter directors and executives on whether Musk damaged the company by disparaging some of its employees and the firm’s attempts to “mitigate” the harm.

The billionaire targeted Vijaya Gadde, Twitter’s lead in-house lawyer, as the platform’s “top censorship advocate” over the company’s decision to prevent users from sharing a New York Post story about President Joe Biden’s son Hunter.

The case is Solak v. Twitter Inc., 2022-0491, Delaware Chancery Court (Wilmington).