The news: Twitter has accepted Elon Musk’s offer to buy the social media giant. The sale is expected to close in 2022, per Ars Technica.
How did we get here? The Twitter-Musk drama has been brewing since the Tesla CEO started buying Twitter stocks, hitting a 9% share of the social network at the beginning of April. The two sides reportedly worked through Sunday night to finalize a deal.
- Musk made an offer to buy the social media app outright for $43 billion April 14.
- Twitter’s board immediately went on high alert, enacting a poison pill defense to keep Musk at bay, per Reuters.
- Undeterred, Musk obtained $25.5 billion in debt financing from a bank group including Morgan Stanley, Bank of America, Barclays, MUFG, Societe Generale, Mizuho Bank, and BNP Paribas.
- The remaining funds will come from equity, including $12 billion of margin loans against Musk’s Tesla stock to finance the transaction.
- The Wall Street Journal reports that Musk made video call pitches to select Twitter shareholders over the weekend, hoping they could sway the company’s decision. Twitter shares rose more than 5% premarket Monday.
- Musk’s rationale for buying Twitter is that he wanted to make it a private company and allow people to speak more freely on the service. “Twitter has extraordinary potential. I’ll unlock it,” Musk wrote in his letter to the board.
Citizen Musk: Altruistic free speech aspirations aside, purchasing Twitter gives Musk political leverage similar to Rupert Murdoch’s purchase of the New York Post in 1976 as well as his 2007 purchase of The Wall Street Journal.
- Billionaires buying into the media is nothing new. Jeff Bezos bought The Washington Post for $250 million in 2013.
- Musk, the world’s wealthiest person, will own one of the world’s largest megaphones and could impose his will on how it operates, essentially giving him the ultimate bully pulpit.
What’s the catch? Ownership by Musk won’t immediately solve Twitter’s problems—namely stagnant user growth, sliding engagement, and a rotating door for leadership.
- Depending on changes enacted by Musk, Twitter could become a different service, one without any content moderation or the facility to block or ban abuse and misinformation in the name of free speech.
- Twitter, whose value rests in its 354.3 million active users, could see an exodus if changes in the social media company’s fundamentals change significantly.
- Once the sale is final, pending shareholder approval, Twitter will need to double-down on advertising to pay off the various debts used for Musk’s acquisition.