Elon Musk Buys Twitter
Liliana Soler '22 Staff Writer
On April 14, 2022, billionaire Elon Musk made an offer to buy Twitter. Musk submitted bank commitments just one week later, on April 21st, and has offered $44 billion for the social media platform. One of Musk’s biggest challenges was convincing banks to fund his purchase. He had to show banks that Twitter produces enough cash to be a worthwhile purchase and that he would cut down the costs surrounding Twitter. Musk told banks he would slash salaries for positions such as board directors, which could eliminate up to $3 million in costs. Banks state Musk’s proposal to them was more of a vision rather than a concrete plan, making many people wary about Musk taking over the company. Musk has no way of making job cuts or having access to confidential information until he actually takes control of the company, which made banks skeptical, but he did manage to acquire $13 billion in loans and will use a $12.5 billion loan tied to his Tesla company. Musk will pay for the rest with his own money.
Twitter officially accepted Musk’s offer and confirmed their acceptance on April 25, 2022. In the press release which announced the deal, 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.” This quote comes after Musk said his main reason for becoming involved with Twitter would be to end the censorship he believes Twitter is causing. Musk said, “I think it’s very important for there to be an inclusive arena for free speech.” He believes that, rather than bans, Twitter should have more temporary suspensions. This would open an opportunity to reinstate former President Donald Trump’s Twitter account, which was permanently suspended in 2021.
Because this deal was unanimously voted for by the Twitter Board of Directors, it was expected to be final later in 2022. Recently, however, there have been multiple issues on both sides which are impacting the execution of the deal. On May 9th, 2022, Musk indicated that he was looking to revoke his offer of $44 billion and attempt to purchase Twitter at a lower price. Due to developments in the deal (such as financing issues on Twitter’s part), the company does not seem to be worth as much to Musk as it once appeared. According to Hindenburg Research, “If Elon Musk’s bid for Twitter disappeared tomorrow, Twitter’s equity would fall by 50% from current levels. Consequently, we see a significant risk that the deal gets repriced lower.” If Musk revokes his offer, Twitter is in trouble. Musk has enough leverage to lower his offer and have Twitter still accept it. However, on Friday, May 13, Musk announced his Twitter offer was on hold due to disagreement with Twitter over their studies of spam/bot accounts and Musk’s alleged breach of a non-disclosure agreement between him and Twitter. Musk revealed that Twitter’s sample size for bot checking is 100 accounts and that he would do his own investigation with 100 accounts. Musk’s reveal of this information violated the NDA between the company and Musk. This led to tension between Musk and Twitter. On May 13th, Musk tweeted, “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” As of May 15th, Musk continues to berate Twitter and there is not much indication that the deal will once again be in motion any time soon.
Even if Musk becomes Twitter’s owner, many do not believe his financial goals for the platform are realistic. Brent Thrill, a Wall Street expert, states Twitter has never grown at the numbers Musk has set as his goals. The number of users reaching 600 million by 2025, for example, are far-fetched and should not be expected to be reached. Musk states he is still committed to a deal with Twitter. Whether Twitter feels the same is uncertain. There aren’t many indications that Musk will be able to change as much as he plans to, but there may at least be some policy changes and reimplementation of accounts should Musk become Twitter’s new owner. The deal will likely develop over the next couple of weeks as Musk’s violation of the NDA and Twitter’s true value are evaluated.
Twitter officially accepted Musk’s offer and confirmed their acceptance on April 25, 2022. In the press release which announced the deal, 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.” This quote comes after Musk said his main reason for becoming involved with Twitter would be to end the censorship he believes Twitter is causing. Musk said, “I think it’s very important for there to be an inclusive arena for free speech.” He believes that, rather than bans, Twitter should have more temporary suspensions. This would open an opportunity to reinstate former President Donald Trump’s Twitter account, which was permanently suspended in 2021.
Because this deal was unanimously voted for by the Twitter Board of Directors, it was expected to be final later in 2022. Recently, however, there have been multiple issues on both sides which are impacting the execution of the deal. On May 9th, 2022, Musk indicated that he was looking to revoke his offer of $44 billion and attempt to purchase Twitter at a lower price. Due to developments in the deal (such as financing issues on Twitter’s part), the company does not seem to be worth as much to Musk as it once appeared. According to Hindenburg Research, “If Elon Musk’s bid for Twitter disappeared tomorrow, Twitter’s equity would fall by 50% from current levels. Consequently, we see a significant risk that the deal gets repriced lower.” If Musk revokes his offer, Twitter is in trouble. Musk has enough leverage to lower his offer and have Twitter still accept it. However, on Friday, May 13, Musk announced his Twitter offer was on hold due to disagreement with Twitter over their studies of spam/bot accounts and Musk’s alleged breach of a non-disclosure agreement between him and Twitter. Musk revealed that Twitter’s sample size for bot checking is 100 accounts and that he would do his own investigation with 100 accounts. Musk’s reveal of this information violated the NDA between the company and Musk. This led to tension between Musk and Twitter. On May 13th, Musk tweeted, “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” As of May 15th, Musk continues to berate Twitter and there is not much indication that the deal will once again be in motion any time soon.
Even if Musk becomes Twitter’s owner, many do not believe his financial goals for the platform are realistic. Brent Thrill, a Wall Street expert, states Twitter has never grown at the numbers Musk has set as his goals. The number of users reaching 600 million by 2025, for example, are far-fetched and should not be expected to be reached. Musk states he is still committed to a deal with Twitter. Whether Twitter feels the same is uncertain. There aren’t many indications that Musk will be able to change as much as he plans to, but there may at least be some policy changes and reimplementation of accounts should Musk become Twitter’s new owner. The deal will likely develop over the next couple of weeks as Musk’s violation of the NDA and Twitter’s true value are evaluated.