Mercurial billionaire Elon Musk now says so wants to buy Twitter directly, taking it in private to restore his commitment to what he calls “free speech.” But its $ 43 billion bid, which seemed to fall flat with investors on Thursday, raises as many questions as it answers.
Among them: is it serious? Can you raise the money? Would a sale make shareholders happy? And what would the social platform be like if it succeeds?
Twitter said its board “will carefully re-evaluate the proposal.” But a large investor has already spoken out against the offer. Prince Alwaleed bin Talal of Saudi Arabia, of which Bloomberg News controls more than 4% of Twitter, said on Thursday it was “rejecting” the offer.
I don’t think the offer proposed by @elonmusk ($ 54.20) is close to the intrinsic value of @Twitter given their growth prospects.
Being one of the largest and long-term shareholders of Twitter, @Kingdom_KHC & I reject this offer. pic.twitter.com/XpNHUAL6UX
– الوليد بن طلال (@Alwaleed_Talal) April 14, 2022
“I do not think the proposed offer is @elonmusk ($ 54.20) is close to the intrinsic value of @Twitter given its growth prospects, “Alwaleed wrote on Twitter.
Why is Musk interested in Twitter?
Apparently because the service, he says, does not live up to its potential as a “platform for free speech.” Musk insists he is not interested in making money with Twitter and said on Thursday that his motivation stemmed from the awareness that “having a public platform with the utmost confidence and being widely inclusive is extremely important for the future of civilization.”
Twitter, like other social media platforms, is suspending accounts for violating content standards, such as violence, hate speech, or harmful misinformation. His suspension of former President Donald Trump angered his supporters.
Musk has described himself as an “absolutist of free speech,” but has blocked Twitter users who question whether or not they agree with him. Regulators have also accused their car company, Tesla, of retaliating against black workers who spoke of discrimination.
Musk calls himself an “absolutist of free speech.” He says Trump shouldn’t be kicked out of Twitter because tech companies shouldn’t be “the arbiter of free speech.”
However, he usually silences critics, both on Twitter and at Tesla’s workplace.
– Robert Reich (@RBReich) April 14, 2022
Musk has said where will he get the funds to buy Twitter?
No. And its regulatory filing says the bid is subject to “the completion of the planned funding.”
During an interview on stage Thursday at the TED 2022 conference, Musk vaguely noted that he has “sufficient assets” to complete the deal, adding, “I can do it if possible.”
Typically, individuals or companies that offer to buy other businesses come with aligned financing, whether in the form of cash, stocks, or debt. But his bid letter did not include details on how he would organize the funding.
Can you use your personal wealth to buy it directly?
Musk is the richest man in the world, according to Forbes, with a fortune of nearly $ 265 billion. But much of his money is tied to shares in Tesla (he owns about 17 percent of the company, according to FactSet, which is valued at more than $ 1 trillion) and SpaceX, his private space company. It is unclear how much cash Musk has.
“I think this is going to be a little painful and I’m not sure I can really get it,” Musk said in his interview on Thursday.
Musk could sell Tesla shares to raise money, which could hurt the price of Tesla shares, or apply for a loan against its shares. But Forbes notes that it has already used more than half of its stake in Tesla as a loan guarantee.
Would Twitter shareholders be happy with their offer?
The shares traded below the bid price of $ 54.20 per share on Thursday, closing at $ 45.08, suggesting that investors doubt the deal will be complied with. Markets are closed on Fridays in view of Good Friday.
Shares have been trading above $ 70 over the past 12 months, reaching a high of $ 80.75 in February 2021.
There has been a rotation of executives since co-founder Jack Dorsey left on Twitter in November with a new CEO, Parag Agrawal, whose initial actions have led to internal reorganizations. There have been no major changes on Twitter so far.
Despite its disproportionate influence over high-profile celebrity and politician posters, as well as a devoted base of journalists, Twitter has fewer users than rivals on social media like Facebook and TikTok. Musk himself is a big user, with over 81 million followers.
Dorsey, still a major shareholder, has not indicated what he thinks of Musk’s bid. As mentioned above, Alwaleed of Saudi Arabia has spoken out against the offer.
Twitter just said it will look at the offer. The media has said the board is considering a defense against a hostile takeover, known as the “poison pill.” A spokesman declined to say whether the board was suspending the move.
How could Musk change Twitter?
It’s hard to know with Musk, and even trying to solve this hypothesis could be taking the man too seriously. By saying that Twitter does not live up to its potential to be a “platform for free speech,” it seems to be saying that it would reduce content moderation.
But he has also called for the company to crack down on spam accounts, which means more restraint.
He proposed removing ads from the service (ads are like Twitter makes money) and turning its San Francisco headquarters into a homeless shelter. It also seems to approve a button to edit tweets.
What could be Musk’s downside as a Twitter owner?
Social media companies are struggling to contain misinformation and hate speech. Musk, whose tweets may lead online bullies to swarm his critics online, doesn’t seem interested in moderating content.
“Regulators around the world will be delighted with the potential implications of free speech if Musk’s takeover bid is successful,” said GlobalData analyst Rachel Foster-Jones. “Musk is clearly serious about promoting freedom of speech for the benefit of democracy, but the line between free speech and hate speech or misinformation is becoming increasingly blurred, and Attempts to change Twitter could easily lead to these problems being out of control. “
In his talk with Anderson, Musk said that Twitter is “bound by the laws of the country where it operates, so obviously there are some restrictions on freedom of expression in the United States, and of course Twitter should abide by these rules.” . But he said it was “quite dangerous” for “tweets to be mysteriously promoted and degraded” and to have a “black box algorithm”.
What’s next?
Twitter may hire bankers and advisors to help it review the deal, Third Bridge technology, media and telecommunications analyst Scott Kessler said. And other buyers could emerge: “It seems that if potential strategic and / or financial buyers are interested in Twitter, they should probably get involved now.”
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