Why may security and privacy omissions be easier to establish than spam counts?

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Security and Privacy Omissions May Offer a More Straightforward Path for Musk's Legal Challenge Than Spam Count Claims

Claims that Twitter failed to disclose security and privacy risks could present a more accessible avenue for Elon Musk to extricate himself from the US$44 billion acquisition deal compared to his allegations regarding the misrepresentation of spam accounts. This is largely due to differing legal standards for proving misrepresentation versus omission, particularly concerning the requirement of demonstrating reliance on the disclosed information. While the spam account issue necessitates Musk proving he relied on Twitter's public statements when making his offer, the whistleblower's allegations concerning security could be classified as an omission, potentially bypassing this reliance hurdle.
Proving Reliance on Disclosed Information

For Musk to succeed on his claim that Twitter misrepresented the number of spam and bot accounts, he must demonstrate that he personally relied on Twitter's disclosures about these figures when deciding to purchase the company. Corporate deal specialists have noted that this will be a challenging aspect of his case, especially since Musk himself publicly cited the eradication of spam as a primary motivation for acquiring Twitter. Establishing this direct reliance is a critical legal prerequisite for claims of misrepresentation.
The Legal Distinction of Omissions

In contrast, the allegations raised by former Twitter security chief Peiter Zatko, suggesting the company withheld crucial information about its security and data privacy vulnerabilities from investors and regulators, could be legally framed as an omission. Under contract law, proving an omission generally does not require the party claiming harm to demonstrate they relied on the specific undisclosed information. This distinction offers a potentially less burdensome path for Musk's legal strategy.
Establishing Materiality of Undisclosed Risks

Despite the potential advantage of proving an omission, Musk would still need to establish that Twitter's purported weak defences against cyber threats constituted a material risk that was not adequately disclosed to investors. Furthermore, to justify walking away from the acquisition without incurring the US$1 billion termination fee, Musk would ultimately have to prove that this undisclosed omission resulted in a material adverse effect (MAE) on Twitter. An MAE is typically defined as an event that substantially diminishes the long-term value of an acquired company.

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Why may security and privacy omissions be easier to establish than spam counts?

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