A judge ruled on Wednesday that Elon Musk can use evidence from a Twitter whistleblower in his legal case against the social media company.
Twitter is currently battling Musk in court over his attempt to nix a previous offer to buy the company for $44 billion. Musk claims that the true number of fake accounts on the platform could number as high as 33% rather than the company’s reported 5%, with a lower number of monetizable daily active users potentially justifying a lower valuation. A trial to determine the status of the acquisition deal is scheduled for October 17.
Although she did not amend the date of the trial, Delaware Chancery Court Chancellor Kathaleen McCormick granted attorneys representing Musk permission to use the account of former Twitter executive Peiter “Mudge” Zatko — who claimed in a recent whistleblower account that his colleagues did not have the resources or motivation necessary to determine the number of bots on the platform — in their arguments.
Twitter reported losses of $0.08 per share in its second-quarter earnings, falling below the $0.14 gain per share expected by analysts. The rough quarter was attributable to “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk,” the company said in a press release.
Earlier this year, Twitter joined other technology companies in attempting to cut costs by pausing hiring and reducing office space on multiple continents. The company’s stock price has fallen from $64.98 one year ago to $41.22, marking a nearly 37% decline. However, shares rose over 6% following McCormick’s decision to avoid moving the trial.
During court procedures on Tuesday, Twitter lawyer William Savitt revealed that Musk had texted Michael Grimes, a managing director at investment bank Morgan Stanley, on May 8 to express fears about the Russian invasion of Ukraine and its potential effects on the global economy. “Let’s slow down just a few days. Putin speech tomorrow is extremely important,” Musk said. “It won’t make sense to buy Twitter if we’re heading into World War III.”
The text could potentially place Musk in breach of contract, which requires the buyer to use his best efforts to complete a deal, and could work against his claim that an inaccurate bot count was behind his hesitancy, according to a report from The New York Times’ DealBook.
Zatko’s whistleblower report, which was obtained by CNN and The Washington Post, also claimed that Twitter leadership misled board members and government officials about potential vulnerabilities that left the platform open to hacking, foreign manipulation, and spying. He asserted that one or more current employees are working for a foreign intelligence agency.
“All engineers had access. There was no logging of who went into the environment or what they did,” Zatko wrote. “Nobody knew where data lived or whether it was critical, and all engineers had some form of critical access to the production environment.”
Twitter’s lawsuit against the world’s richest man nevertheless asserts that he is obligated to complete the deal. “Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” the lawsuit said. “Musk apparently believes that he … is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.”