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Elon Musk’s Fight Over Twitter Deal Could Attract Further SEC Scrutiny, Experts Say

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Twitter’s fight with Elon Musk to enforce his $44 billion (roughly Rs. 3,52,300 crore) deal to buy the social media platform could attract scrutiny from the US securities regulator over whether Musk has misled the market during the course of the deal. Twitter on Tuesday asked a Delaware court to order the Tesla Inc boss and world’s richest person to complete the merger, setting in motion what promises to be one of the biggest legal showdowns in Wall Street history.

On Friday, Musk said he was terminating the deal because Twitter violated the agreement by failing to respond to requests for information regarding fake or spam accounts on the platform, which is fundamental to its business performance.

In its Tuesday lawsuit, Twitter not only alleged that Musk was really backing out for financial reasons and that he broke the terms of the deal, but that Musk also broke US securities rules by failing to disclose his 9 percent holding in Twitter on time.

Twitter also claims that in contriving a “narrative” about its spam accounts, Musk misrepresented Twitter’s handling of the issue and his communications with the social media company, “with equally misleading implications about the likelihood that the merger would be completed and about Twitter’s operations.”

Twitter’s shares have been on a wild ride since Musk disclosed his stake in the company on April 4, jumping 27 percent initially and rising to nearly $52 (roughly Rs. 4,200) when the deal was agreed on April 25, before falling to around $37 (roughly Rs. 3,000) on Wednesday.

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Legal experts say the case could attract scrutiny from the U.S. Securities and Exchange Commission (SEC), which has been locked in a feud with Musk since the billionaire tweeted in 2018 that he had funding secured to take Tesla private when the SEC found he did not. The agency already has several open probes into Musk, according to court filings and media reports.

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“When you’re dealing with statements about public companies that have an impact on stock prices, the SEC’s antenna goes sky- high,” said Stephen Crimmins, a partner at Davis Wright Tremaine LLP and a former SEC litigator. “So the SEC’s got to be looking at it, and all the more so because of Musk’s recent history with the SEC.”

The SEC and Twitter declined to comment. Representatives for Musk did not respond to requests for comment.

Twitter estimates that around 5 percent of its users are fake accounts, although independent researchers estimate the number could be three times higher.

‘BASELESS’ PUBLIC CLAIMS

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To be sure, the securities laws allow Musk to change his mind and to play hardball in negotiations. And because Musk is not a Twitter executive, he does not have the same legal obligations to its shareholders when making public statements about the company as Twitter insiders. Nevertheless, Musk has a general legal obligation not to mislead the market through material misrepresentations or omissions, said lawyers.

In April, the SEC asked Musk whether the disclosure of his Twitter stake was late and why it indicated that he intended to be a passive shareholder, adding that his response should address public statements he had made about whether Twitter adheres to free-speech principles, a regulatory filing shows. Musk refiled the disclosure to indicate he was an active investor.

Lawyers said the SEC would likely expand that query to explore whether Musk had been honest in his subsequent public statements about his intentions for the deal and the spam issue.

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Twitter alleges, for example, that in a May 13 tweet Musk misrepresented Twitter’s sample size for estimating spam accounts as just 100, even though earlier that day Twitter had explained in a private due diligence meeting that it sampled a total set of approximately 9,000 accounts per quarter.

The social media company also cited other “baseless” public claims Musk subsequently made, including that Twitter’s fake users could be as high as 90 percent and that it had “lax” detection methods.

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“The SEC will take a look and will want to know if he’s raising pretextual excuses and, essentially, misleading shareholders in the market,” said Robert Frenchman, a partner at Mukasey Frenchman LLP.

The agency might also explore whether Musk aimed to hurt Twitter’s share price, with the aim of renegotiating the deal terms, said Howard Fischer, a partner at Moses & Singer and a former SEC attorney.

“Arguably, his constant public comments … could be seen as market manipulation,” he added.

© Thomson Reuters 2022


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Facebook, Instagram Integration Improved With Deeper Account Centre Integration by Meta

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Facebook and Instagram are set to offer better integration as parent company Meta announced it is testing a deeper integration across both platforms. The firm has revealed two updates that include a new user interface for the Accounts Center feature across mobile and Web platforms, and a redesigned login and onboarding experience on its mobile apps. The tests include two new features that are intended to make it easier for users to switch between and create new accounts and profiles on Facebook and Instagram. The company is also testing allowing users to receive notifications for both Facebook and Instagram profiles in the same place.

In an announcement on its blog, Meta revealed that the new interface is currently in testing and allows existing users who have added their Instagram and Facebook credentials to the same Account Center, to switch between the two apps without navigating to their phone’s home screen, multitasking menu, or app drawer. Meanwhile, a redesigned mobile login and onboarding experience being tested allows iOS and Android users to sign in or create multiple accounts from a single Instagram or Facebook credential.

Meta also confirmed that existing security features will continue to apply to the updates that include blocking unrecognized devices from using interoperating login credentials for Instagram and Facebook accounts that have the two-factor authentication feature turned on for either of the accounts.

Users will also be notified of any account activity across Facebook and Instagram accounts on a single Accounts Center section including the creation of a newly linked Facebook or Instagram account, according to the company.

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Meta says it is now testing the new user interface on iOS, Android, and the Web while the login and onboarding workflow redesign is being tested on iOS and Android. The company adds that both features are being tested across the globe. The new features are “currently limited to Facebook and Instagram,” Meta said.

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The updates have arrived post the introduction of Meta accounts in August of this year and a recently reported downturn in both revenue and user growth for the American social-media giant.


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Instagram Story Time Limit Increased to 60 Seconds: Report

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Instagram is reportedly increasing the time limit for Instagram Stories to 60 seconds, from the earlier limit of 15 seconds. Previously, Instagram Stories that were longer than 15 seconds would be broken up into separate segments. The social media company is said to have begun testing the change with select users towards the end of last year. Earlier this month, Instagram rolled out parental supervision tools and Family Center in India. Meta had announced the parental supervision tools and the Family Center tool back in March. The company was recently slapped with EUR 405 million (roughly Rs. 3,200 crore) fine for violating strict European Union data privacy rules.

According to a recent report by TechCrunch, Instagram confirmed that it is increasing the time limit of Instagram stories to 60 seconds from the earlier limit of 15 seconds. Previously, if a user had posted a video longer than 15 seconds, it used to get broken up into smaller segments. This made the process of uploading videos to Instagram Stories more challenging, including tagging and mentioning other users.

As mentioned earlier, Instagram is said to have begun testing the new change with select users towards the end of last year.

Earlier this month, Instagram also rolled out parental supervision tools and Family Center in India. The Family Center is a place for parents and guardians to access supervision tools and resources from leading experts. These tools will let them see the screen time spent by their kids on Instagram and impose time limits. The new parental controls are part of Meta’s attempts to protect children who actively use its social media apps.

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Instagram was recently slapped with a EUR 405 million (roughly Rs. 3,200 crore) fine for violating strict European Union data privacy rules. The Meta-owned social media platform was found mishandling the personal information of teenagers. Ireland’s Data Protection Commission’s investigation revealed that Instagram displayed the personal information of users between the age of 13 and 17 years. Instagram’s parent Meta said it disagrees with the way the fine was calculated and has expressed its desire to appeal the fine imposed by the regulator.

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Elon Musk, Twitter CEO Parag Agrawal Said to Postpone Depositions Ahead of Upcoming Trial

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Tesla CEO Elon Musk won a reprieve from questioning by Twitter lawyers Monday, according to several press reports. The billionaire had been scheduled to give a deposition in his high-stakes court fight with Twitter over whether he has to follow through with his agreement to buy the social platform for $44 billion (roughly Rs. 3,37,465 crore).

Instead, Musk’s questioning was postponed to a future date. Twitter CEO Parag Agrawal, who was also scheduled to face Musk lawyers on Monday, likewise postponed his deposition, according to a person who was briefed on the matter.

The Musk postponement was reported by Bloomberg, Reuters and the Wall Street Journal, all of which attributed the information to anonymous sources.

News of the postponements fueled a brief rally in Twitter shares, which jumped 5.4 percent to $43.03 (roughly Rs. 3,500), apparently on hopes of a settlement in the case. That enthusiasm waned later in the day. Twitter shares closed Monday at $41.58 (roughly Rs. 3,300), eight cents higher than they opened.

Court watchers said that such postponements are not unusual ahead of major pretrial hearings. A hearing on several significant pretrial motions is scheduled for Tuesday.

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Both men were expected to answer questions posed by opposing lawyers ahead of an October trial that will determine who is at fault for the seeming collapse of Musk’s Twitter bid, not to mention who owes whom large sums of money as a result. The trial is set to begin October 17 in Delaware Chancery Court, where it’s scheduled to last just five days.

Musk, the world’s richest man, agreed in April to buy Twitter and take it private, offering $54.20 (roughly Rs. 4,180) a share and vowing to loosen the company’s policing of content and to root out fake accounts. In July, he attempted to back out of the deal, leveling a number of charges at Twitter as justification for his action.

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Twitter subsequently sued Musk to force him to complete the acquisition.


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