Elon Musk buys Twitter
Elon Musk looks set to take over social-media website Twitter. But is anyone getting a good deal? Matthew Partridge reports
When Elon Musk said he would buy social network Twitter and take it private earlier this month, few took him seriously. Some even thought the Tesla founder “was making a joke about cannabis”, says Giulia Bottaro in The Daily Telegraph (420 is a slang term for cannabis; Musk, who has made similar jokes in the past, bid $54.20 a share). Yet now the Twitter board – after first trying to stymie his efforts by introducing a “poison pill” defence – has accepted his bid, meaning that Musk (subject to shareholder and regulatory approval) looks set to become one of the world’s “most powerful media barons”.
Musk plans to fund the deal with $25.5bn in debt, including a margin loan of $12.5bn backed by his shares in Tesla, plus $21bn in equity, reports Bloomberg. If it goes through, the deal would mark one of the largest leveraged buyouts on record. However, concerns that Musk will have to fund the equity portion by selling some of his stake in the electric carmaker have sent its shares tumbling to trade around the $875 mark. “If the stock fell below $740... Musk wouldn’t have enough to cover the full $12.5bn.”
But overall, “Musk has cut a deal buyout billionaires can only admire”, notes the FT’s Due Diligence. If he pulls out, he is only on the hook for $1bn or 3% of the $44bn bid – “less than half of that of a typical private-equity buyout”.
A costly battle for free speech
Musk, who has more than 86 million followers on Twitter, has framed his bid as a battle to protect free speech – but whatever your view on the politics, $44bn is a steep price for “a slowgrowing, 16-year-old company that reported a net loss of $221m last year”, notes Lex in the FT. Musk’s “gift for attention”, plus the possible reinstatement of banned users (including former president Donald Trump), means user numbers will probably grow. But if Twitter wants to raise advertising rates it will have to extract more user data, “tricky when privacy concerns are rife”.
Regulators might also have something to say about the idea of relaxing content moderation, says Dan Milmo in The Guardian. Last week, the European Union said that the likes of Twitter, Facebook and Google must do more to tackle illegal content or face huge fines, while the UK’s contentious online safety bill would require social-media platforms “to protect their users from harmful content”. There are similar moves to create a “digital safety bureau” afoot in the US.
Indeed, Musk’s ownership could actually increase regulatory pressure on Twitter, says Peter Sweeney on Breakingviews. Until now Twitter has been free to ignore Chinese efforts to crack down on online dissent because “Twitter’s servers, staff and customers are almost entirely out of president Xi Jinping’s reach”. By contrast, Tesla makes half of its cars in Shanghai, “enjoys tax breaks” as a result, and depends on local suppliers for key components. If Musk doesn’t bend to Beijing’s will, Tesla’s Chinese operations “may suddenly find themselves in regulatory hot water”.