Elon Musk shouldn’t get his hopes up that revelations from a Twitter whistleblower would boost the Tesla boss’s chances of winning his case against the social media site, experts told The Post.
The whistleblower, former Twitter security chief Peiter “Mudge” Zatko, accused the company of “lying about bots to Elon Musk” and having lackluster cybersecurity, among other explosive allegations.
The news sent twitter shares plunging 7.3%, to close at $39.86 on Tuesday, indicating that investors believe the Delaware Court of Chancery is less likely to force Musk to go through with his deal to buy the site for $54.20 per share.
But investment analyst and ex-corporate attorney J.B. Heaton told The Post that the markets are overexcited about Zatko’s claims — and that Tuesday’s drama will turn out to be “much ado about nothing.”
The feuding parties have a hearing slated for Wednesday before the trial begins Oct. 17.
“There are no ‘gotchas’ here,” Heaton told The Post, predicting that Twitter’s share price will surge back to $44 or $45 in the coming days. “I don’t see how people can point to something that gets Musk out of the deal.”
Market Securities, an arbitrage trading firm, likewise downplayed Tuesday’s downturn as an “overreaction” in an investor note obtained The Post.
“We think adjusting downside is warranted, given Musk continues to try to tear the company apart,” Market Securities analysts wrote, adding they found Zatko’s claim that he hasn’t spoke to Musk to be “suspect.”
“Even then so [sic], this seems like an overreaction,” Market Securities said.
Both Heaton and Market Securities predicted that the whistleblower complaint, which was filed with the Securities and Exchange Commission in July, is unlikely to have a serious impact on Delaware Court of Chancery Judge Kathaleen McCormick.
Even if Zatko were to theoretically present evidence that Twitter intentionally downplayed a bot problem, the coverup would have to be extremely vast in order to get Musk out of the deal, Heaton said.
Simply revealing that spam accounts made up 6% or 9% instead of 5% of Twitter accounts would likely not be enough to prove that Musk was misled to an extent that should allow him to wriggle out of the deal, Heaton said. Instead, the level of fraud at Twitter would have to be far higher.
“Anything that gets Musk out of this deal is sending some people to prison — it would have to be that severe,” Heaton said. “It would have to be an almost Enron-level disclosure problem. If Elon gets away, you could probably expect to see criminal charges being brought.”
Market Securities likewise predicted that “this news today should NOT weigh on the Judge, other than her personal fear that this will not settle before getting to her.”
The trading firm said that it had previously thought Musk and Twitter would reach a settlement on the eve of the trial, but that Zatko coming forward could “embolden” Musk to fight the case in court.