Elon Musk finally buys twitter
The Bird is Freed
Elon Musk has finally consummated the deal to buy twitter for $54.20. This draws an interestingly complex acquisition saga to a close. Until it becomes fodder for a cacophony of MBA case studies, at least.
What now for twitter?
Twitter is now in private hands. Elon Musk can do what he wants with it, subject to legal constraints and financing terms. However, he has signaled a few key changes.
First, the senior management team is gone. The CEO, CFO and large portions of the senior legal term are gone. Reportedly, Elon Musk floated the idea of firing 75% of Twitter’s workers, but he has denied wanting to do so. It is unclear whether this was ever a plan. And, if he had raised such a prospect, it is unclear whether such notions were merely facetious hyperbole or puff. Nevertheless, Twitter appears likely to be streamlined.
Second, Elon Musk has raised the idea of creating an “X” app. Elon Musk has previously spoken favorably about apps such as WeChat. And, he has noted that buying twitter could accelerate “X”. At the least, this would involve additional features and revenue streams.
Third, Elon Musk has taken steps to reassure advertisers that twitter will not become a free-for-all. Thus, given Elon Musk’s preference for free speech, he is likely to tweak content moderation and algorithms, but is unlikely to allow untrammeled free speech. It appears that he would still block hate speech. However, he is likely to address allegations of political bias in twitter’s algorithms.
Elon Musk is also likely to address concerns over the number of bots on the platform. This is relevant to advertisers: advertisers do not want to pay for impressions – or clicks – from bots that will not generate sales. Thus, addressing concerns about bots will give advertisers greater confidence.
What does this mean for Tesla?
Tesla shareholders have greeted the deal coldly. The deal has required Musk to sell Tesla shares. This exerts negative price pressure, weakens his incentives regarding Tesla’s stock price, and sends a signal that he believes ‘overpriced’ twitter shares might be a better use of his time and money than Tesla’s shares. However, the latent risk of being legally forced to buy twitter would ameliorate the latter concern.
Elon Musk also risks becoming distracted. He already has significant involvement in Tesla, Neuralink, SpaceX, and The Boring Company. Additional involvement in Twitter could further stretch his time. Tesla’s shareholders will likely monitor for any performance slips.
Tesla also faces regulatory issues stemming from this. Tesla has a significant presence in China. China has rules about allowable speech. If Tesla and twitter are seen as closely linked, then there could be pressure to censor some speech lest it jeopardize Tesla’s operations. Elon Musk should ensure an appropriate delineation between the companies to avoid such issues.
The positive for Tesla is that this helps to cement Tesla’s advertising channel. Tesla has generally not advertised in the same way as other auto manufacturers. Twitter has been a key channel. The takeover helps to ensure that channel is uninterrupted.
This deal is good news for twitter shareholders who have now exchanged shares in a loss making company for cash at a significant premium. The futures of both Tesla and twitter will be interesting to monitor. No doubt this deal will be a staple of MBA courses for years to come.