Twitter takeover raises questions on whether priority is free speech or revenue generation
▶ Analysts waiting to see how Musk plans to transform platform after acquisition sets off political firestorm
Tesla chief executive Elon Musk’s agreement to buy 100 per cent of Twitter and take it private has started a political firestorm that will probably not die any time soon, even after the deal is finalised.
The world’s wealthiest person struck a deal on Monday to buy the microblogging platform for $44 billion.
Shareholders will receive $54.20 a share, a 38 per cent premium over the social platform’s closing stock price on April 1.
The deal is expected to be completed by the end of this year.
“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,” Mr Musk said.
“I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots and authenticating all humans. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”
Cameron Winklevoss, a cryptocurrency advocate and entrepreneur who threw his support behind Mr Musk’s takeover bid, said the result was “inevitable”.
Mr Musk’s view about Twitter’s untapped potential is substantiated. The company, which was founded in 2006, has a healthy global user base of about 436 million but was only the world’s 15th biggest social media platform as of January, according to Statista data.
Twitter’s financial performance tends to be lacklustre because of disappointing user and revenue numbers.
The company has tried to address these by introducing new features and increasingly banking on advertising.
“The pressure was on for Twitter to make a decision on Musk’s deal before Thursday’s earnings announcement as many were expecting disappointing results,” Edward Moya, a senior market analyst at New York-based Oanda, wrote in a note.
The offer of $54.20 per share was “great news”, he said, given the company’s current situation. Twitter will report its first-quarter results tomorrow.
“It doesn’t seem like the company was going to get things right anytime soon ... Twitter shares are below the offer price as some investors are concerned that the deal might not close.”
However, the platform has become a flashpoint for discussions that influence society and this has, at times, turned it into a breeding ground for disinformation and harmful content.
The company tried to address these concerns by regulating its own content and suspending offending accounts.
Mr Musk’s vision to improve free speech may come at a price as he has yet to lay out concrete plans on how he plans to achieve this in an era of controversial online content that attracts regulatory and public scrutiny.
“Elon knows one thing and that is having things his way ... [but] he hasn’t given out how he wants to improve free speech,” AvaTrade’s chief market analyst Naeem Aslam said in a note. “If the platform is left ungoverned, it could promote racism, hurting its massive user base. There is little to no information on how Elon wants to improve Twitter’s platform, although he has provided clues about what he doesn’t like in the platform.”
American billionaire investor and television personality Mark Cuban, who suggested last week that Mr Musk’s Twitter bid was a tactic to boost the company’s stock value, tweeted that he was “very surprised” by the agreement.
But that also puts Mr Musk “on the clock”, said Mr Cuban, who noted that he will be paying attention to what happens next.
Saudi billionaire Prince Alwaleed bin Talal, who owns a stake in Twitter through his Kingdom Holding Company, has yet to react to the deal. Prince Alwaleed rejected Mr Musk’s offer on the basis that it was not at par with its value.
In the lead up to the acquisition, employee conversations were quite negative, said Casey Newton, founder of online technology publication Platformer. Even after the announcement, employees remained largely concerned, he wrote.
But Mr Musk’s pledge to overhaul Twitter – opening its algorithms to the public and eliminate bots – has struck a chord with some of them.
“In one-on-one discussions, responses were more tempered. Some employees I have spoken with are open to the idea that a private Twitter run by Mr Musk stands a better chance of improving the service than would a public company beholden to its shareholders,” Mr Newton said.
“They like the fact that he wants to eliminate harmful bots and bring more clarity to how recommendation algorithms work.”
Politics, a frequent topic on Twitter, is one of the segments that could be greatly affected by any changes. US politicians tweeted their comments, with Democrats very concerned and Republicans ecstatic.
The immediate challenge for Mr Musk is to quickly come up with a strategy to realise his vision. Even so, he would need to start planning early and make sure he knows his priorities.
“Mr Musk is going to want to grow users and monetise, but the challenge of Twitter is that you have a highly engaged base that doesn’t generate a lot of revenue,” said Gene Munster of US-based Loup Ventures.
“When Elon talks about unlocking value, is he talking about free speech or making money?”
Twitter’s financial performance has been lacklustre over the years due to disappointing user and revenue numbers