U.S. securities regulators are questioning Twitter about how it calculates the number of fake accounts on its platform.
The Securities and Exchange Commission in June asked the company about the methodology for calculating the false or spam accounts and "the underlying judgments and assumptions used by management.”
The agency's Division of Corporation Finance made the request in a June 15 letter, shortly before Tesla CEO Elon Musk raised the issue as grounds to back out of a deal to buy Twitter for $44 billion.
Such questions can be routine, and it wasn't clear whether the SEC has opened a formal investigation into Twitter's fake accounts. Messages were left Wednesday seeking comment from the agency and Twitter.
The law firm Wilson Sonsini of Palo Alto, California, replied in a June 22 letter saying the company believes it adequately disclosed the methodology in its annual report filed for 2021.
The letter says that Twitter makes its estimates of false accounts with an internal review of sample accounts. The number of fake accounts "represent the average false or spam accounts in the samples during each monthly analysis period during a quarter," the letter said.
It added that fewer than 5% of Twitter's “Monetizable Daily Active Usage or Users,” or mDAU, were fake accounts in the fourth quarter of last year, the period that the SEC had questioned.
