It all started with Elon Musk buying a 9.2 per cent stake in Twitter earlier this month. This 9.2 per cent stake made Musk the largest individual shareholder, making him available for a board seat and perhaps enabling him to steer Twitter in a direction of his liking.
Musk was then asked to join the 11-member Twitter board. The news made Twitter’s stock jump by more than 20 per cent, but things fell through in four days. Twitter CEO Parag Agrawal said in a statement that Musk had backed out, but as one of the platform’s largest shareholders, his input would matter.
Agrawal’s open letter to didn’t really explain what might have happened for Musk to back out, him saying “here’s what I can share about what happened” also indicates that the statement might have been made out of pressure, to offer some semblance of logic over the weekend before markets opened again on Monday.
As The Verge pointed out - “The news that Musk had joined the board had sent Twitter stock shooting up in value, so any delay in sharing the news that he was leaving could spark insider trading concerns.”
On the other hand, it is possible that Musk might have prioritised his ‘goblin mode’ on Twitter as something more important than being a board member. Musk complaining about Twitter, on Twitter, recommending the ‘w’ be dropped from the name, or suggesting that the San Francisco office be turned into a homeless shelter because no one turns up anyway - none of these fit well into the “fiduciary duties as a board member”.
And then came the big twist: an offer only a maverick can make, and likely execute too. Musk the billionaire made a “best and final” offer to buy Twitter offering $54.20 per share in cash. Twitter has “extraordinary potential” and Musk wants to unlock it, at least that is what he said when he announced that he’s “made an offer”.
Musk announced the offer in a filing with the US Securities and Exchange Commission (SEC) on Thursday. The offer price also includes the number 420, so clearly Musk considers this too to be ‘lit’.
Musk wrote in a letter to the Twitter board that he believes Twitter “will neither thrive nor serve (its free speech) societal imperative in its current form. Twitter needs to be transformed as a private company”.
“If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder,” Musk added.
Following his takeover bid, Twitter’s stocks fell by 2 per cent to close at $45.08 on Thursday - “almost unheard of after a takeover offer” as the Wall Street Journal pointed out. So clearly, the shareholders did not “love it” and the potential investor army Musk might need to pressure Twitter’s board might not even exist.
He admitted during his TED Talk in Vancouver on Thursday that while he does have “sufficient assets”, he is not sure if he can actually pull this off. Musk also has not explained how he plans to pay for this deal but did say he has a 'Plan B' when asked.
But Musk can afford to do this alone. He is currently worth $260 billion (according to the Bloomberg Billionaire’s Index). Twitter’s current market valuation is around $37 billion. But according to Vital Knowledge’s Adam Crisafulli’s report, the $54.20 per share offer is “too low for shareholders or the board to accept”. Crisafulli added that Twitter’s shares hit $70 less than a year ago.
Musk has hired Morgan Stanley as his adviser for the takeover, but as WSJ pointed out “the bank is known more for top-shelf merger advice than for big loans but would likely provide some debt financing if a deal moves ahead”.
Despite Musk’s $260 billion riches, he is cash poor and almost all of his wealth is tied up in Tesla and SpaceX shares. And he can’t quite afford to sell those shares right now lest he loses control over those companies. Tesla executives are allowed to borrow up to 25 per cent of their value shares, and Musk’s stake is worth $176 billion.
This makes it theoretically possible for him to borrow $43 billion. “It isn’t clear whether a bank would even make a loan that big secured by a single stock — especially one as unpredictable as Tesla, whose share price Mr. Musk can send swinging wildly with a single tweet,” WSJ pointed out.
Whether Musk can or cannot afford this is too much math at this point, the bigger question is - what happens if he does manage to pull this off?
Twitter employees breathed a sigh of relief when Agrawal announced that Musk would not be joining the board. One of the employees responded to Agrawal’s tweet with - “I’ve kept quiet since the announcement because I wanted to give Twitter leadership a chance to do right by its employees, and they did. Thank you.”
The Verge points out that many American right-wingers have been treating Musk’s seat on the board as a “win for conservatives, a chance to get revenge on the company for banning Donald Trump in 2020 (among other moderation grievances)”. If this theory is anything to go by, it’s understandable why any Twitter employee would be uncomfortable with Musk being on the board.
But then there’s “no immediate evidence that Musk bought his stake in the company to settle some kind of culture-war grievance, but that only raises an even larger question” - what does Musk want from Twitter?
The platform of the free and the home of the brave
If there’s anyone on Twitter who needs to keep the free speech concept alive and kicking, it’s Musk. One of the biggest Twitter trolls, Musk’s feed is full of memes, marijuana references, and absolutely wild posts that send Tesla stocks, Dogecoin and Bitcoin rates shooting off in different directions.
After securing his 9.2 per cent stake in Twitter, Musk started tweeting about the long-requested, often-debated-about edit button. He also said that Twitter’s premium users should immediately be verified.
We should really not have to explain why both of these, among many other things, are absolutely horrible ideas - but we will.
Twitter’s edit button will take away from the platform its credibility. The very fact that public figures of importance and influence cannot edit controversial and/or problematic posts makes the platform a public record for their faux pas. If you tweeted it, it’s out there and someone most definitely has a screenshot or has embedded it on another site. You can delete your tweet, but it will remain in some form or the other.
The whole concept of free speech is not just the option to shoot the shot and go to bed, you can and will be held accountable for that post. And that applies to all users. This is a bane and a boon and something India’s current ruling party has been grappling with. Over Covid-19, riots, farmers’ protests and more, the government has tried to crack down on Twitter asking the platform to hide and delete tweets that might threaten domestic security. The company has held out so far.
For Musk, if he really is the advocate for free speech as he claims, and wants to protect that, being on the board would perhaps be the best way to go. That would have given him a say in how the platform works. But that would stop him from being a loose cannon online. Being on the board also limits how much stock Musk can own.
“There are limitations on how much stock Musk can own and what he can say, springing from a broader duty to act in the best interests of shareholders. If he wanted to muscle the company into a radically different moderation approach, then the restrictions of board membership could have outweighed the benefits,” The Verge rightly pointed out.
This is also not the first time Musk has tried to make a company go private. He tried it with Tesla in 2018 prompting an SEC scrutiny. He had also written a whole email to SpaceX employees in 2013 explaining why the company should remain private. In short, Musk believes that private companies work better and essentially, he won’t have to reign in his goblin mode.
Musk’s takeover bid is the second time Twitter is dealing with an “activist investor”. Investment firm Elliot Management accumulated a 4 per cent stake in Twitter in 2020 and used that “to press for changes, including an ouster of Jack Dorsey as chief executive and more aggressive financial growth”. Dorsey eventually stepped down in November last year.
As the NYT points out - “Elliott’s approach followed the typical formula for activist investors: Acquire a significant stake in a company and then press for governance and strategy changes to drive up the stock price.” But as Rich Greenfield, an analyst for the research firm LightShed Partners said - “Normally an activist is very clear in their intentions. We don’t know what Elon Musk’s true motivation is. Is this Elon having fun? Is this Elon trying to effect change? Is this Elon trying to drive the stock higher?”
According to NYT, “Twitter is particularly susceptible to activists, analysts said, because its founders did not structure the company’s shares in a way that gave themselves more control. The founders of Google and Facebook have maintained voting power over the shares, providing them with an outsize grip over the direction of their companies.”
Many think Musk is doing this for fun, and because he can.
“Musk is using Twitter to have his opinions heard, but it’s not a core activity. It appears to be what he does for fun,” Natasha Lamb, a managing partner at Arjuna Capital, an activist investment firm that owns some Twitter stock, told NYT.
And he does seem to be more interested in shitposting than actually running the company, so there’s really no knowing why he’s doing what he’s doing.
At the end of it all, what does it mean for you and me?
If Musk does manage to buy out Twitter, things could swing either way. Maybe it brings in that edit button and allows people to buy a blue tick making the platform even more chaotic than it already is and Musk could sit around like Nero, getting lit instead of playing the fiddle, as the whole platform goes up in flames.
Musk needs the platform to stand for free speech otherwise there is no way his posts can pass, so that bit is not bad news. Twitter has been used effectively to help in situations, like Indians getting help across the country during the second Covid-19 wave here, and has also been used to spread fake news and cause more trouble. So it can and always will go both ways - bane and a boon.
But if one of the world’s richest men can just buy it off because he can, what does that say about the concept of free speech anyway?
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