The Twitter Takeover
By Julia Mazurek
Wealth easily translates into power – sometimes too much of it. After hinting at the seemingly innocent action through his personal tweets, on March 13th Elon Musk acquired a major stake of 9% in Twitter (TWTR), causing the company's shares to soar, and further resulting in the company offering him a board seat a few days later, which he declined on a short notice.
During the following week, the entrepreneur shares his thoughts about building a completely fresh social media platform with the entire world, through his Twitter account, of course. The reasoning consisted mainly of arguments for free speech. "This is not about economics. It's for the moral good," he stated at a conference in April. Shortly after headlines of newspapers were taken over by the acquisition, on April 25th, Musk took a leap and announced that he will buy Twitter at a price of $54.20 a share, slightly more than 10% higher than $48.45 which the stock was trading for a week prior to the sensational announcement.
It quickly comes to mind that Twitter is one of the largest social media companies in the world. Thus how can it be possible for a single individual to purchase a company worth over $13 billion for $44 billion in cash? Musk’s financing consists of many divergent sources emerging from those eager to swiftly grasp a potential personal benefit from one of the biggest tech acquisitions of all time. The investor has managed to gather approximately $7 billion in funding for the acquisition – a total of capital emerging from 20 different sources.
As of currently, the long list of sponsors consists of individuals such as the Saudi Prince al-Waleed bin Talal willing to purchase 30 billion shares of the company stock, Larry Ellison, the co-founder of Oracle Corporation (ORCL), venture capital funds Andreessen Horowitz and Sequoia Capital Fund, and even the management of cryptocurrency exchange Binance. It is crucial to note that the details of the financing structure are changing dynamically, however, the originally announced plan also included loans from several banks such as Morgan Stanley, as well as a $21 billion cash contribution Elon Musk managed to obtain through a sell-off of Tesla (TSLA) stock, as well as a significant amount borrowed against his holdings in Tesla (TSLA).
What can Twitter’s future look like from here? As the company transitions from parent to parent, it seems that it is bound to undergo more than one significant change when in Elon’s hands. Apart from the frequently brought up strong free speech argument, the famous investor whose Twitter profile is currently followed by 91.3 million accounts, stated that he wishes to create an open-source algorithm which will display tweets to users, reducing moderation and the presence of unnecessary spam on the social media platform. This seems to be easier said than done, as the creation of a yet unknown algorithm in itself is likely to cause fierce protests among users. Moreover, the company is expected to undergo major financial changes which are to result in Twitter’s annual revenue increasing from $5 billion in 2021 to an astonishing $26.4 billion by the year 2028, with cash flow simultaneously increasing from $3.2 billion in 2025 to $9.4 billion in 2028.
As Elon Musk will become the temporary CEO of the social media giant when the deal is finalized in the upcoming year, as he announced previously, the company will be taken private to begin serious financial and technical surgery. In the time being, the CEO of Tesla will find himself loaded with quite a number of new responsibilities consisting of assuring current Twitter employees that the sudden acquisition is not an aggressive hostage, collaborating with stakeholders and long-term business partners, as well as, most importantly of all, addressing the now re-ignited, primarily focused on the United States, political debate on the topic of free speech, misinformation and corporate social responsibility. Elon’s hands are loaded, to say the least.
Bibliography
Elon Musk Secures Funding for Twitter (TWTR) Bid From 19 Investors. (n.d.). Retrieved May 10, 2022, from Investopedia website: https://www.investopedia.com/musk-secures-funding-for-twitter-bid-from-19-investors-5271243
tN. R.-L., Owen Thomas,the Protocol news. (2022, April 15). Elon Musk’s Twitter takeover: Almost all of your questions answered. Retrieved May 10, 2022, from Protocol website: https://www.protocol.com/elon-musk-twitter-takeover-faq