Elon Musk is offering to buy Twitter for $ 43 billion

Elon Musk is offering to buy Twitter for $ 43 billion

Elon Musk offered to buy Twitter for $ 43 billion. Musk, the richest person in the world, says he wants to turn Twitter into a private company because “he believes[s] Freedom of speech is a social imperative for a functioning democracy. “

Should it be taken seriously? Yes. And no.

A short version of the “yes” case is that Musk – which is currently worth $ 273 billion, thanks to the growing value of Tesla, its public electric car company – has the resources to buy Twitter.

Twitter, unlike other public technology companies like Facebook and Google, does not have a financial structure that gives its founders and management control over the company without owning a majority of its shares. So, in theory, if enough investors who own Twitter shares want to accept Musk’s offer, he will be the owner of the company.

The short version of the “no” case is that just because Elon Musk says something doesn’t mean it’s true – even when he’s talking about his money. Musk is, to say the least, insanely inconsistent. In 2018, for example, he announced – on Twitter – that he wants to turn Tesla into a private company and to have “secured funds”. Which turned out to be not true.

Recently, Musk: acquired a 9 percent stake in Twitter; agreed to join the company’s board; decided not to join the board; he tweeted erroneous proposals to “improve” the company, such as turning part of its headquarters into a homeless shelter. He told investors ua Application of the Securities Commission: “After the last few days of thinking about this, I decided I wanted to buy the company and take it privately.”

Who knows what they will think in a few days?

Even shorter: Musk offered $ 54.20 per share for Twitter, which traded at $ 45 per share on Thursday morning before his offer went public. But Twitter traded more than $ 70 a share a year ago. Investors can simply decide that Musk’s offer is not good enough and nothing else will happen.

So, there is no way to say what will really happen in the near future. Musk says that his offer is only one-time – the “best and final” offer. “I don’t play a back-and-forth game,” he wrote this morning. But, again, he is Elon Musk. I take his word for it, even if these are the words he writes in the securities documentationnot recommended.

Twitter, as much as it is worth, must take Maska at least semi-seriously. The company announced a let go this morning saying they had seen his offer and would consider it. It is also likely that they knew this was happening: Twitter CEO Parag Agrawal warned that he would “expect interference” on Monday when he announced that Musk would not take a seat on the board after all. Today’s news looks like a significant nuisance!

It would also not be a shock for someone else to make an offer for Twitter now that Musk has put it into play. On the other hand, most of the big tech companies that could afford Twitter and that would be semi-logical takeovers would trigger real antitrust control if they tried to buy it. And a billionaire who buys Twitter and does what he wants with him would be fine, legally speaking. If the board and investors sign Muska, there would be no obvious way for regulators to prevent it.

Update: If you were at camp “it is possible that Musk didn’t think about this at all,” you may be right. In today’s interview, Musk suggested that, just like his private non-bid to take over Tesla, he may not have secured funding for this one either. This is not entirely surprising: like The Wall Street Journal notes, almost all of Musk ‘s wealth is tied to Tesla shares and his ownership of SpaceX, and trying to unlock tens of billions of dollars from those assets would be difficult. Meanwhile, Twitter’s board is reportedly considering using a so-called “poison pill” that would make it harder for Musk to collect even more shares on Twitter.

But here’s another thing: even though he’s Elon Musk, he may be right. Twitter could be better as a private company.

This is not because of Musk’s claim that Twitter should be “a platform for free speech around the world.” My colleague Whizy Kim has already explained why you should be careful when the richest person in the world claims to be an advocate of free speech.

But Musk is not the first person to argue that Twitter should not be a public company. Twitter investors have essentially made that argument for years due to a lack of enthusiasm. And I’ve heard of Twitter executives who have toyed with the idea of ​​finding a private owner for the company in the past.

This is because it is not crazy to claim that Twitter has enormous power as a messaging platform (see, for example, Donald Trump), but limited prospects as a business. In short, Twitter has the same business model – free and supported by advertisers – as Google and Facebook. But it has a much, much smaller reach than those companies, so advertisers won’t give it that much support.

That’s why Google generated $ 257 billion last year, Facebook $ 117 billion – and Twitter $ 5 billion. And that’s why Google is worth $ 1.7 trillion, Facebook $ 583 billion, and Twitter $ 36 billion.

One of the arguments in response to this disparity is that Twitter should not be a free ad-supported business – that it should be something that people pay for. But it’s easy to imagine that if Twitter were to cost usage, most Twitter users would decide they’d rather spend their money on anything else. Which would mean that the remaining paying users would talk to an even smaller audience – which would defeat the appeal that Twitter had for them.

But Twitter is not global the worst work. It’s just not great. Last year, that $ 5 billion in revenue more or less turned into about $ 273 million in profit – a 5 percent margin.

It’s more cost effective than, say, your average store. But nothing like what public investors expect from the super-powerful Silicon Valley technology platform that is shaking the world. But a private owner who isn’t preoccupied with turning Twitter into a profit center could be completely content with that.

Another question is whether Twitter employees – and especially its sought-after engineers – would be happy in a company that doesn’t offer the option of getting rich through stocks and grants. We will have plenty more in the coming days.

But, yes: sometimes billionaires buy things because they want to make money on them, and sometimes billionaires buy yachts, which will not bring them any money. And if you’re the richest person in the world, Twitter could be your $ 43 billion yacht.

Update, 2:15 PM ET, April 14, 2022: This story was updated with a response from Twitter and a report from the WSJ on whether Musk could afford the price of Twitter.

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