What would you do if you were the world’s richest person with a net worth north of US$250 billion ($341 billion)? What if you were an accomplished innovator who owned the world’s most valuable car company worth more than US$1 trillion as well as the world’s most valuable space company worth US$100 billion, and were also the CEO of other firms, including Boring Co that builds huge tunnels, and you grew bored? To avoid boredom, you might try to keep yourself busy by tweeting a lot more to your 80 million or so followers around the world. You might even try championing the cause of free speech and polling your followers on whether they thought there was a need for a new fairer social media platform or an improved version of Twitter.
For more than a week now, the world’s richest person and electric vehicle (EV) pioneer Elon Musk, CEO of Tesla Inc and Space X, has mesmerised the business and tech world with his antics on and at Twitter, the microblogging platform. Not only has he been tweeting a lot, Musk disclosed last week the purchase of 73.5 million shares — or 9.2% — of Twitter’s stock, becoming its largest shareholder, way more than company’s founder Jack Dorsey who has a mere 2.4% stake and recently stepped down to focus on his other full-time gig as founder CEO of fintech giant Block Inc, formerly known as Square. Dorsey’s successor Parag Agrawal, promptly invited Musk to join Twitter’s board. When the world’s richest man becomes your firm’s substantial shareholder, it is prudent to lay out the red carpet rather than try to fight him off.
A week and dozens of tweets later — including a suggestion to turn Twitter’s San Francisco headquarters into a “homeless shelter” and perhaps removing the letter “w” to rename Twitter as “Titter” — Musk, who had initially agreed to join the board, abruptly changed his mind and declined the board invitation. The about-turn came after Twitter informed Musk that he will have to go through “background checks” before he could take his seat in the boardroom. Why would the world’s richest person, whose life is an open book, in part due to his constant tweets, agree to background checks by Twitter?
For his part, Agrawal ominously warned of “distractions ahead” for the social media firm. As a director, Musk would have been restricted from increasing his stake to more than 14.9% and barred from tweeting about what was going on inside the company. As an outsider, he is now free to mount a hostile takeover and continue to snipe at Twitter management and board. Unlike Google’s owner Alphabet Inc, Facebook’s holding firm Meta Platform and many other tech firms, Twitter does not have dual-class shareholding that allows its founders to keep predators at bay.
Musk is currently worth US$251 billion according to the Bloomberg Billionaires list, richer than e-commerce giant Amazon.com’s founder Jeff Bezos whose net worth is US$175 billion and software behemoth Microsoft Inc’s co-founder Bill Gates, who, even after his divorce and giving away a huge chunk of his wealth to charity, is still worth US$129 billion. Twitter currently has a market capitalisation of US$36 billion. Assuming Musk has to fork up a 25% premium, the takeover would value the company at around US$45 billion.
To put it in perspective, buying Twitter will not make much of a dent in the net worth of Musk, who made over US$50 billion in capital gains in March alone, not including profits from the recent surge in his recent Twitter stake. Musk could buy Twitter with his last month’s gains and still have plenty of spare change left over. Clearly, anyone who makes US$50 billion in capital gains in the middle of a falling stock market, skyrocketing fuel costs, rising interest rates and fear of upcoming recession, clearly has the wherewithal to buy a third-tier tech firm like Twitter.
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Why buy Twitter?
Why is Tesla’s CEO paying US$45 billion for a microblogging and social networking platform that encourages its audience to share posts or tweets? He could buy the world’s most prestigious newspaper New York Times (market value US$7.4 billion) for much less, although its owners, the Sulzberger family, would initially resist any such attempt. The Times would be a nice trophy. Amazon’s Bezos, Musk’s arch-rival, owns Washington Post which he purchased for US$250 million nearly nine years ago. The EV pioneer could even buy The Wall Street Journal from media baron Rupert Murdoch, who paid US$5 billion for the venerable financial daily 15 years ago and is now more focused on his right-wing TV news network, Fox News.
Yet, Twitter’s reach is far greater than Wall Street Journal, New York Times and Washington Post combined. It is also more influential. Twitter has 300 million active users and its 2021 revenues exceeded US$5 billion.
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It also has better demographics. In America, 42% of Twitter users have a college degree. On average, its users have far higher incomes than users of rival social media platforms like Instagram, Facebook, Pinterest, Snapchat and WhatsApp. Little wonder, then, that Musk believes he can fix Twitter.
Twitter’s problem has been that it has not been able to monetize its reach the way Instagram or Google have. Can Musk change Twitter and make it a better platform for both users and advertisers? His strategy is twofold. First, make Twitter better for users. As an avid tweeter, he knows what the users want. Second, Musk wants to end Twitter’s dependence on advertising. Among other things, Tesla’s CEO wants Twitter Blue, the newly launched paid subscription service, to be completely ad-free. Video streaming service Netflix Inc has shown that a subscription model can be as good as, or even better than the advertising-based model. If you are a paying subscriber, you should not have ads forced down your throat.
The problem is that over 90% of Twitter’s revenues currently come from advertising. If you choke off its ads, you take all its oxygen. But Musk is not arguing that all of Twitter should not have advertising. He only wants the paid subscription part of the platform to be ad-free. He also wants Twitter Blue to be affordable. He has argued that by cutting the monthly subscription fee from US$3 to US$2.50, Twitter Blue can attract more paid subscribers. If just half of Twitter’s current daily users subscribe to the paid service at US$2.50 a month, it would be equal to half of Twitter’s total annual ad revenues.
Even before he unveiled that he has taken a stake in the social media firm, Musk had tweeted about the necessity of having an “edit” button on Twitter. Right now, you can delete your entire tweet but are not allowed to edit your tweets if you change your mind and want to sanitise them, something that CEOs and politicians would love to do.
Musk has also tweeted about making Twitter’s algorithms open-sourced. Social media algorithms are built to maximise engagement, which in turn helps brings advertising. Yet, a toxic platform is not conducive to advertising. The EV pioneer’s worry has been that Twitter’s moderation control can guide the conversations on the platform in a harmful way. By taking those controls away through open-sourced algorithms, Twitter will help solve such thorny issues.
Free speech at the public town square
Musk has also been very vocal about free speech and retaining Twitter’s role as a public square where free speech can thrive. Twitter suspended former US president Donald Trump in January 2021 in the aftermath of the US Capitol attack. Trump is reportedly toying with the idea of running against his successor President Joe Biden in 2024. Some analysts believe that Musk might be talking up “free speech” to help Trump get back on the platform. Trump had 88 million followers when he was suspended. By getting one of its most famous users back, Twitter might get more paid subscribers and see its engagement numbers soar.
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Can Musk really change Twitter? The microblogging platform stock is virtually where it was on the day of its IPO in 2013. Other Internet firms have seen their stock quadruple, quintuple, or grow tenfold or more since their listings. Musk is the latest in a long line of activist investors who have come to Twitter and tried changing it. Two years ago, Elliott Management, an activist investment firm, took a US$1 billion stake in Twitter. Over the years, private equity firms as well as tech and media firms including Salesforce.com and Walt Disney Inc have looked at buying Twitter only to walk away. Now that Musk has a foot in the door, no one is showing interest in wrestling control of Twitter.
Still, there is no shortage of billionaires who want the Twitter public town square for their own purposes. Conservative billionaire Peter Thiel, one of the closest confidants of both Trump and Facebook founder Mark Zuckerberg, is one of them. Thiel and Musk were co-founders of fintech firm PayPal before it merged with e-commerce platform eBay and then spun off again as a listed entity.
There is a special purpose acquisition company (spac) called Digital World Acquisition Corp (DWAC) that has been trying to merge with Trump’s social media firm Truth Social. DWAC, which listed at US$10 early last year, saw its stock rocket to over US$175 after Trump supporters jumped on the bandwagon. The stock has since fallen 72% but is still trading at US$48 a share with a market value of US$1.83 billion.
If you throw in Truth Social and DWAC into the mix with Trump, Musk and Thiel, you get a compelling cocktail. Musk is just looking for some fun. Trump needs a viable public town square like Twitter to mount a credible comeback and Thiel wants to be a “king maker”. If Thiel can help Trump return to the White House, it will cement his position as America’s premier powerbroker. Thiel, who has reportedly poured tens of millions of dollars into this year’s Congressional elections, already owns a substantial stake in the free speech-oriented video streaming site Rumble Video, a sort of YouTube for pro-Trump MAGA (Make America Great Again) fans.
What will Musk do now? As smart and talented as he is, innovator and entrepreneur Musk is also famous for his incredibly short attention span. So don’t be surprised if he just gets bored with Twitter after a few months and moves on. For a mega-billionaire like him, there are always other shiny things that might draw his attention tomorrow and he wouldn’t even remember that he had spent a couple of billions and a few hours thinking about Twitter.
Over the weekend, just before Musk announced that he will not join the Twitter board, he posted a meme that read: “In all fairness, your honour, my client was in goblin mode.” A few hours later he deleted it. Goblin mode can be described as a way of life that gives people permission to ditch societal norms and embrace their basic instincts. Essentially, Musk is saying that he really doesn’t care what people think about what he says. When you are the world’s richest person, you can afford to be in goblin mode all the time.
Assif Shameen is a technology and business writer based in North America
