In a transaction that will transfer Control of Twitter populated by millions of users and global leaders to the world’s richest person, Elon Musk clinched a deal to obtain the social media platform for $44 billion in cash on April 25.
It is an important moment for the 16-year-old company, which came up as one of the world’s most influential public squares and now experiences a string of challenges.
Calling himself a free speech absolutist, Musk has criticized Twitter’s moderation. He objects to giving too much power on the service to corporations that advertise and wants Twitter’s algorithm for prioritizing tweets to be public.
Political activists expect that a Musk regime will mean the reinstatement of banned individuals including former US President Donald Trump and less moderation. While some human rights activists expressed fears of an increase in hate speech, conservatives cheered the prospect of fewer controls.
User-friendly tweaks to the service, such as defeating “spambots” that send unbearable amounts of unwanted tweets and an edit button, have also been recommended by Musk.
After Musk wooed Twitter shareholders with financing details of his offer, discussions over the deal, which last week appeared uncertain, accelerated over the weekend. Twitter, under pressure, began negotiating with Musk to acquire the company at his proposed $54.20 per share price.
In a statement, Musk 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.”
Former Twitter CEO Jack Dorsey Endorsed The Deal
Late on Monday, former Twitter CEO Jack Dorsey commented on the deal with a series of tweets that thanked both current Twitter CEO Parag Agrawal and Musk for “getting the company out of an impossible situation.”
“Twitter as a company has always been my sole issue and my biggest regret. It has been owned by Wall Street and the ad model. Taking it back from Wall Street is the correct first step.”
On Monday, shares of Twitter rose 5.7% to finish at $51.70. The closing price the day before Musk revealed he had obtained more than 9% stake gets a near 40% premium from the deal. The offer is, nevertheless, well below the $70 range where Twitter was trading in 2021.
Managing director at Boyar Value Group, which holds a stake in Twitter, Jonathan Boyar said:
“I think if the company was given enough time to transform, we would have made substantially more than what Musk is currently offering. However, If the public markets do not properly value a company, an acquirer eventually will.”
A tradition of billionaires’ buying control of influential media platforms, including Jeff Bezos’ 2013 acquisition of the Washington Post, is maintained by Musk’s move.
Twitter said Musk got $25.5 billion of debt and margin loan financing and is offering a $21 billion equity commitment.
Musk, who according to Forbes is worth over $268 billion, has said he is not mainly interested in Twitter’s economics. He commented:
“Having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. I don’t care about the economics at all.”
Where Does Elon Musk Want To Take The Platform?
Musk is chief executive of both aerospace company SpaceX and electric car maker Tesla Inc (TSLA.O) and it is unclear what he will do or how much time he will devote to Twitter.
On Monday, Agrawal told employees:
“Once the deal closes, we don’t know which direction the platform will go.”
In an email to clients, Edward Moya, an analyst at currency broker OANDA, said the deal was
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“Great news for Twitter shareholders as it doesn’t seem like the company was going to get things right anytime soon.”
But he also said:
“Tesla shareholders can’t be happy that Musk will have to divert even more attention away from winning the EV (electric vehicle) race.”
Yet, Musk’s 84 million-strong Twitter account is perceived as an important, marketing, and free public relations tool for Tesla. The company’s board approved the Twitter transaction and is now subject to a shareholder vote. In that context, analysts said no regulatory hurdles are expected.
Once Musk detailed his financing package and no other bidders emerged, the company’s board of directors had its back “against the wall”, said Daniel Ives, an analyst at Wedbush.
Twitter has been accused of playing a role in the January 6, 2021, storming of the U.S. Capitol and credited with helping spawn the Arab Spring uprising, even though it is only around a 10th of the size of far larger social media platforms like Meta Platforms Inc’s (FB.O) Facebook.
“A lot of people are going to be super unhappy with West Coast high tech as the de facto arbiter of free speech, after Trump was banned by Twitter over concerns around incitement of violence following the U.S. Capitol attack by his supporters.”
In a Fox News interview on April 25, Trump, whose company is building a rival to Twitter called Truth Social, said he would not return to Twitter.
Although the White House refused on Monday to comment on Musk’s deal, it said President Joe Biden has long been unsettled about the power of social media platforms.
White House spokesperson Jen Psaki said:
“Our concerns are not new. The platforms need to be held accountable. The president has long talked about his concerns about the power of social media platforms, including Twitter and others, to spread misinformation.”
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