Sometimes legal letters can be an interesting read! Elon Musk’s cancellation letter to Twitter by his legal team may be a crushing blow to Twitter’s business, not just this deal.

Musk’s ending of his acquisition of Twitter is centered on the company’s mDAU as reported in their SEC filings… and that is key. If Musk can prove that Twitter misrepresented investors in their official filings with the SEC then not only is Musk off the hook for any end-of-deal damages but Twitter could be subject to a not-so-friendly SEC investigation.

For its part, Twitter continues to stand by its claim that less than 5% of monetizable daily active users are spam or bots and plans to pursue legal action to enforce the deal.

“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery,” tweeted Twitter Chairman Bret Taylor.

Elon Musk says in his filing that it appears that Twitter is dramatically understating the proportion of spam and false accounts represented in its mDAUcount:

“Preliminary analysis by Mr. Musk’s advisors of the information provided by Twitter to date causes Mr. Musk to strongly believe that the proportion of false and spam accounts included in the reported mDAU count is wildly higher than 5%,”

The letter purports that Musk’s acquisition team was not provided the key data that they requested and not in a usable format for them to further assess whether the fake accounts included in their mDAU stat is in fact lower than 5% as claimed by Twitter in all of its SEC filings. The mDAU stat is key to predicting the success of Twitter since 95% of its revenue comes from advertisers and fake people don’t convert to purchases.

Another key aspect of the filing is Musk’s assertion that his team didn’t receive all of the Board materials they requested related to the Board members conversations about the mDAU metric and their calculation of the number of spam and false accounts.

Why is this key? If Musk can show that Board members themselves had concerns about the accuracy of the “less than 5% mDAU are fake” metric then Musk doesn’t have to prove the stat is wrong, he can just point to Board statements. Musk did not provide any evidence that the Board in fact did discuss this issue substantively, but one assumes that because this stat is key to their business and their stock price, it’s likely they did to some extent. What was said in these possible discussions is key.

Additionally, anything said by Board members or staff that counters the “less than 5% mDAU are fake” guidance by Twitter in SEC filings and in public statements would be evidence for any future SEC filings.