Daily Management Review

Musk Buys Twitter For $44 Billion


Musk Buys Twitter For $44 Billion
On Monday, Elon Musk agreed to purchase Twitter Inc for $44 billion in cash, transferring ownership of the social media network used by millions of people and world leaders to the world's richest person.
It's a watershed moment for the 16-year-old firm, which rose to become one of the world's most influential public squares but now faces a slew of obstacles.
Musk, a self-described "free speech absolutist," has slammed Twitter's censorship. He wants Twitter's algorithm for selecting messages to be made public, and he opposes giving advertisers too much control on the platform.
Political activists predict that under a Musk administration, there will be less moderation and the reinstatement of prohibited individuals such as former President Donald Trump.
Conservatives applauded the idea of fewer restrictions, while human rights groups expressed concerns about an increase in hate speech.
Musk has also campaigned for changes to the service that would make it more user-friendly, including as an edit button and a way to combat "spam bots" that send out a large number of unwelcome tweets.
The deal's discussions quickened over the weekend when Musk wooed Twitter shareholders with financial details of his bid, which appeared doubtful last week.
Twitter began negotiating with Musk to buy the firm at Musk's suggested $54.20 per share price under pressure.
"Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated," Musk said in a statement.
Late Monday, former Twitter CEO Jack Dorsey tweeted about the arrangement, thanking both Musk and new Twitter CEO Parag Agrawal for "pulling the company out of an impossible situation."
"Twitter as a company has always been my sole issue and my biggest regret. It has been owned by Wall Street and the ad model. Taking it back from Wall Street is the correct first step," he said.
On Monday, Twitter's stock surged 5.7 per cent to $51.70. The purchase price is over 4 per cent more than the closing price the day before Musk announced his purchase of more than 9 per cent of the company.
Nonetheless, the offer is far lower than the $70 range at which Twitter was trading last year.
"I think if the company were given enough time to transform, we would have made substantially more than what Musk is currently offering," said Jonathan Boyar, managing director at Boyar Value Group, which holds a stake in Twitter.
However, he added, "If the public markets do not properly value a company, an acquirer eventually will."
Musk's decision follows in the footsteps of other billionaires who have purchased control of prominent media platforms, such as Jeff Bezos' purchase of the Washington Post in 2013.
Musk has obtained $25.5 billion in debt and margin loan funding, as well as a $21 billion equity commitment, according to Twitter.
According to Forbes, Musk is worth $268 billion and has stated that the economics of Twitter are not his primary focus.
"Having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. I don't care about the economics at all," he said in a recent public talk.
Musk is the CEO of both Tesla Inc and SpaceX, and it is unclear how much time he will dedicate to Twitter or what he will do.
"Once the deal closes, we don't know which direction the platform will go," Agrawal told employees on Monday.
In a note to clients, Edward Moya, an analyst at currency trader OANDA, said the purchase was "excellent news for Twitter shareholders given it doesn't look like the firm was going to get things right anytime soon."
But he also said: "Tesla shareholders can’t be happy that Musk will have to divert even more attention away from winning the EV (electric vehicle) race."
Nonetheless, Musk's 84 million-strong Twitter following is regarded as an essential, free public relations and marketing tool for Tesla.
The Twitter transaction has been approved by the company's board of directors and is now up for a shareholder vote. Analysts predict no regulatory stumbling blocks.
Wedbush analyst Daniel Ives said the company's board of directors was "against the wall" after Musk disclosed his funding proposal and no other bids surfaced.
Although it is only approximately a tenth the size of significantly larger social media platforms like Meta Platforms Inc's Facebook, Twitter has been credited for sparking the Arab Spring revolt and suspected of playing a role in the Jan. 6, 2021, takeover of the United States Capitol.
Musk tweeted after Twitter banned Trump for worries about incitement of violence following his supporters' attack on the US Capitol: "A lot of people are going to be incredibly angry with West Coast high tech being the de facto arbiter of free speech."
Trump, whose firm is developing a Twitter rival called Truth Social, stated in a Fox News interview on Monday that he will not return to Twitter.
The White House declined to comment on Musk's deal on Monday, although President Joe Biden has long been concerned about social media companies' dominance.
"Our concerns are not new," said White House spokesperson Jen Psaki, adding that the platforms need to be held accountable. "The president has long talked about his concerns about the power of social media platforms, including Twitter and others, to spread misinformation."