Elon Musk of Tesla and Starlink fame now officially owns Twitter after months of squabbles and negotiations. Since Facebook purchased WhatsApp in 2014, the $44 billion deal is the largest social media takeover to date. However, because it is a social network with a large user base, many believe that under Musk’s ownership, Twitter might experience some significant changes. The parameters of the agreement and potential future changes to Twitter are detailed below.
How Elon Musk Bought Twitter?
Twitter was a publicly traded corporation on the New York Stock Exchange until Elon Musk bought it. Individuals and institutional investors have been able to purchase shares of the company on the open market ever since the company became public in 2013. Before he made a bid to purchase Twitter and take it private, Musk had already acquired a 9.2% share in the company.
Musk was assured a seat on the board of directors, thanks to his 9.2% ownership. Additionally, it elevated Musk to the position of the company’s top shareholder, dwarfing even Twitter founder Jack Dorsey’s 2% ownership.
Musk would have to persuade other board members to support him because his under-10% ownership wasn’t sufficient to influence decisions at Twitter. Additionally, for the duration of his board tenure, which runs through 2024, Twitter forbade him from acquiring more than 14.9% of the business. Likely as a result of these two circumstances, Musk turned down the board position and instead made the board an offer to buy the entire business.
Musk proposed to buy Twitter entirely for $44 billion in cash in April 2022. That translated to $54.20 per share, which was significantly more expensive than the stock’s pricing at the time. In other words, if Musk’s offer is accepted, existing investors would receive a 38% greater cash payment than they would if they sold their shares on the open market. The board of Twitter finally decided to accept the buyout bid after some early uncertainty regarding Musk’s ability to obtain funds. The company said, “The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.”
According to Reuters, Musk closed the $44 billion deal using a combination of loan and equity financing. Additionally, since April, he has sold shares in Tesla for over $15.5 billion, raising enough money from other sources to cover almost $27 billion in debt. Following that, Musk approached banks for a further $13 billion in financing, with Morgan Stanley pitching in about $3.5 billion. Different investing organisations contributed the remaining $5.2 billion. This included holding businesses like Qatar Holding, cryptocurrency exchange Binance, venture capital firms like Sequoia Capital, as well as individual investors like Saudi Arabia’s Prince Alwaleed bin Talal.
Why Elon Musk Bought Twitter?
Elon Musk wanted to purchase Twitter because he already uses the service. Musk often updates his Twitter account, where he currently holds the third-most followers with over 111 million.
Despite his fondness for the site, Elon Musk has been a vociferous Twitter critic. In the months preceding the ownership shift, he questioned numerous Twitter practices, most frequently in the form of tweets, ranging from content control to income creation.
Musk expressed his displeasure with the platform’s use of spam and bot accounts. Musk pledged to delete these accounts and authenticate legitimate accounts days after making his buyout offer. But it didn’t end there. A few weeks later, Musk demanded Twitter management show him evidence that only 5% of accounts were spam or bot accounts and tweeted about putting the agreement “on hold”. Months of discussion ended with Musk finally caving and purchasing Twitter in accordance with the conditions of the original agreement.
Additionally, Musk questioned the content filtering practises of the current Twitter management, alleging that they had unfairly silenced some political interests and harmed free expression on the site. Twitter, according to Musk, is the digital town square where issues important to humanity’s future are discussed. Musk expressed his expectation that, once Twitter is under his control, the company will stop issuing permanent bans and permit “legal free expression” to continue existing on the site.
What will Elon Musk do with Twitter after taking it private?
Existing shareholders will receive their payout of $54.2 per share now that Elon Musk has closed the deal and acquired Twitter. After that, as they have no ownership interest in the company, they won’t have any input on the platform’s daily operations or overall direction. The offer was approved by 98% of the shareholders.
It’s a little less certain what will happen to Twitter. After taking over the corporation, Musk has already taken some significant actions.
Musk tweeted “The bird is freed” on his very first day, a reference to both Twitter’s logo and his critique of the platform’s limitations. The CEO, CFO, and general counsel of the company were subsequently fired by him. The former, Vijaya Gadde, was also in charge of setting corporate policies and is thought to be the one who suspended Donald Trump’s Twitter account.
Elon Musk stated that his future goals include increasing revenue and reducing Twitter’s reliance on advertising. Prior to the sale, Musk stated specific objectives in a pitch PowerPoint, including raising revenue from $5 billion to $26.8 billion by 2028 and reducing dependency on advertising revenue by half. Additionally, Musk wants to expand the company’s payment operation and add monetization capabilities for larger accounts so that it generates $1.3 billion in revenue by 2028. Since Elon Musk co-founded PayPal and served as its CEO from its inception until 2000, this has happened before. Users on Twitter can only tip each other with cryptocurrencies at the moment.
Social media scholars and experts have expressed concerns about Musk’s plans to relax restrictions regarding Twitter’s content management. They issue a warning that the platform might be inundated with misinformation, trolling, and hate speech masquerading as free expression. These issues haven’t received a direct response from the CEO of Tesla and SpaceX. Musk did promise, however, that he wouldn’t allow the social media site to turn into a “free-for-all hellscape, where anything can be said with no consequences.”
In the end, Musk claims he wants to develop a curated Twitter experience where users can choose the content they want to view. That may resemble TikTok, which customizes users’ streams according to their interests, or it could look completely different. Time will only tell.
Elon Musk stated that the acquisition of Twitter was only the first phase of a larger strategy to create X, an “everything app,” in the long run. Once more, it’s not obvious whether this concept will mesh with already-existing mega applications like WeChat and Grab. These integrated apps are widely used in Asia for ride-sharing, shopping, food delivery, payments, and more. According to a leaked transcript of Musk’s town hall with Twitter employees, he at least sees WeChat as an inspiration for the platform’s future. By 2028, Musk wants to have more than 100 million X users, according to his pitch deck.
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