What does $44 billion buy you these days? Well, it is more than the GDP of all but 85 of the world’s countries, surpassing Serbia ($41bn), Azerbaijan ($40bn) and Jordan ($40bn) to name but a few.
It is as much as the climate budget proposed by US President Joe Biden ($44.9bn) and more than seven times the $6 billion one Elon Musk said he’d give to the UN to help end world hunger, if they managed to provide a detailed plan (they did, he didn’t).
It would be the biggest takeover in history as recently as 1996 (when Bell Atlantic bought NYNEX for $52 billion) if we ignore inflationary values.
Yet for Musk, it is just another investment, it seems, a purchase made on a whim – as the Tesla billionaire finally reached an agreement with the Twitter Board of Directors to take over the social media giant this week.
To fund the acquisition Musk has agreed to invest $21 billion of his own money while taking on significant financing – raising $22.5 billion in debt, including a margin loan of $12.5 billion against his shares in Tesla. This means he’ll be on the hook for 70% of equity unless he brings in other financiers.
Even though the deal has yet to be ratified by Twitter’s shareholders, the impact is being seen elsewhere. Concern over the possibility that Musk will have to sell off some of his Tesla shares has seen $126bn (£100bn) off the carmaker’s value – a 12.2% drop which is the equivalent of a $21 billion drop in Musk’s own stake in the company.
Twitter’s shares also slid on Tuesday, falling 3.9% to close at $49.68, even though Musk agreed to buy it on Monday for $54.20 a share in cash.
Free Speech
Though the figures involved may raise eyebrows, there are other questions around the takeover, such as why Musk – the world’s richest man – wants to buy a company that recorded a $221 million loss last year.
Fortunately, the South African entrepreneur has been very vocal (through his own, popular Twitter account) as to why he is seeking to enter the world of social media. Firstly, he clearly enjoys using the platform. He has over 83 million followers and he tweets prolifically, albeit sometimes controversially.
Despite his love for using it, he is also a vocal critic of both how Twitter is run and some of the functionality of the platform, such as a lack of edit button. Since he became the largest shareholder earlier this month, Musk has been even more critical, suggesting changes he would make should he buy it.
Musk has said he wants Twitter to fulfil its “extraordinary potential,” but Twitter responded to his takeover flirtations by going on the defensive, deploying a “poison pill” strategy which prevented anybody from owning more than 15% of its shares while Musk circled. The board U-turned after he revealed a strategy for a hostile takeover.
Another key interest Musk has discussed is “free speech” and his desire to preserve it on the platform. Musk has been critical of Twitter’s decision to moderate politicians and media outlets who have breached its rules.
Announcing the takeover, he said: “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.
“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.”
Tweeting, of course, he added that: “By “free speech,” I simply mean that which matches the law. I am against censorship that goes far beyond the law. If people want less free speech, they will ask government to pass laws to that effect. Therefore, going beyond the law is contrary to the will of the people.”
But his acquisition comes at a time when regulators are assessing the role of social media giants in society, and how free speech fits in a world dominated by Facebook, Google and others.
There has already been a backlash on Twitter, with some accounts threatening to leave the platform should Musk complete his takeover. Some are concerned it will allow misinformation, disinformation, abuse and hate speech to flourish on the website more than it already does.
Australian lobby group Digital Rights Watch, for example, has expressed concern that while Musk claims the takeover is about free speech, it’s about power.
“While free speech is important, you have to account for asymmetries of power and other barriers that stop people from speaking freely,” chair Lizzie O’Shea said.
“Musk’s style of free speech absolutism will tilt the scales in favour of the rich and powerful who can silence or bully critics. What Musk really seems to want is freedom from accountability.
“Musk’s proposed approach to content moderation will likely make Twitter a less safe place for many people to speak freely while allowing powerful disinformation and propaganda campaigns to spread unchecked.”
Comment from Mike Rhodes, CEO of ConsultMyApp, was dismissive of Musk’s bid: “What started out as an interesting move for both Elon Musk and Twitter with the subsequent joining and not joining of the board, his attempt now to buy Twitter outright turns what was an interesting proposal, into an utterly ridiculous and empty attention-grabbing statement.
“As Donald Trump Sr & Jr are both finding out in their own cash-heavy ways, you cannot buy success or stake in the app industry.
“It would be plain ridiculous for Twitter to accept this offer and place itself in the hands of someone who has demonstrated his sporadic nature in the past two weeks.
“Twitter is a fantastic example of an independently run and managed app that brings together the best parts of tech, social media and culture all in one. This is something that Elon will quickly learn, cannot be bought.”
Expensive edit
So, what will happen? For now, it looks likely that Musk will become the new owner of Twitter. The board have approved the deal, and the shareholders are likely to follow. He doesn’t own any competing assets, so regulatory approval should come swiftly – unless EU regulators opt to intervene, which seems unlikely.
Then, Musk will have the keys to the castle. He has already proven with Tesla and SpaceX that he knows how to take a big idea and turn it into a reality but making Twitter profitable – especially if he plans to use its profits to service the debt, he will accrue to buy it – could be Musk’s biggest challenge yet.
It could go down the advertising route – already Twitter’s largest revenue service – or start offering premium services, as it does with Twitter Blue in the US and Australia. Or Musk might introduce subscription service, although this would not necessarily fit with his free speech absolutism.
There is also talk about putting Twitter’s algorithms out into the public through open sourcing, which he claims will help the platform with his aim to “increase trust, defeating the spam bots, and authenticating all humans.”
Musk hasn’t outlined specific plans to follow the requirements of an open-source license and while transparency is welcomed, there is a reason the likes of Google and Reddit do not disclose how their systems work: fear of exploitation from spammers and other bad actors.
Old faces could return to the platform, with Republicans in the US saying they support Musk’s takeover in the hope he will lift the ban against former President Donald Trump. Trump, for his part, has said he will not return, focussing instead on his own social media platform, Truth Social.
Finally, Twitter users might get that long awaited edit button – one of Musk’s own demands for the service. I don’t know about you, but $44 billion seems an awful lot of money to pay just to get an edit button.
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