Powered by
Sponsored by

What next after Elon Musk acquires Twitter? All you need to know

Musk will acquire the platform for approximately $44 billion

MUSK-TWITTER/SEC Tesla CEO Elon Musk

Twitter announced on Tuesday that Tesla CEO Elon Musk has reached an agreement to acquire the social media organisation for approximately $44 billion. "Twitter has a purpose and relevance that impacts the entire world," Twitter CEO Parag Agrawal said in a tweet. "Deeply proud of our teams and inspired by the work that has never been more important."

This development comes after weeks of prolonged drama. In the first week of April, Twitter had announced that it was adpoting a "poison pill", an informal term used for flooding the market with shares and diluting the stakes of the party launching a hostile takeover bid of the company. 

What next for Twitter?

That is the million dollar question. Musk, who said he wanted to buy Twitter because he thinks it is not living up to its potential as a platform for "free speech", has hinted at what he aims to change. The current board will almost certainly be sacked, and there will be massive changes on the protocol level. Musk has stated that Twitter's era of censoriousness has come to a close, and that permanent bans on the platform will be a rarity under his command. He has also spoken about open-sourcing the Twitter algorithms, which would transparently inform the public why they were seeing the content that they were seeing, and opening up avenues like self-verification for users. 

Musk likes to troll—he had once posted that he will remove the 'w' from Twitter, and make it Titter—but he is a shrewd businessman. Many over-the-top proclamations he made prior to the acquisition would have been for exaggerated effect, and he will understand first and foremost Twitter's possibility for revenue expansion. Twitter's revenue generation is multiples lower than its counterparts like Facebook and Google, and fixing the more ingrained corporate failures will be Musk's first challenge.

He will most likely stress on new features like 'Super Followers', through which Twitter users can monetise from engagements, and implement the long-awaited 'edit' button for tweets. 

First, though, he will need to make sure that existing users don't leave the platform, and new users come in droves. Hence, divisive proposals (maybe like the re-induction of former US president Donald Trump who was banned from the platform) will probably take a backseat, at least in the early days.

Timeline of the corporate drama

1. Musk, a mercurial entrepreneur, has long been taking Twitter to task, saying the company wasn't living up to its potential as a platform for free speech. Musk, who—as recently as March—was publicly mulling starting his own social media site, had instead accumulated 9 per cent of Twitter stock and turned the company's biggest shareholder in April. Only Vanguard Group's suite of mutual funds and ETFs controlled more Twitter shares. Twitter had then announced that Musk would be joining in the board of directors, but it did not materialise. An equity cap which comes with the board position would prevent Musk from launching any takeover bids of Twitter. As long he remained on the board, Musk would be prohibited from amassing more than 14.9 per cent of Twitter’s stock, according to the agreement. That led him to decline the board seat. 

2. Musk instead launched a takeover bid, proposing to buy the remaining shares of Twitter that he doesn't already own. He had offered $54.20 per share of Twitter's stock. He called that price his best and final offer. "I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy," Musk said in his regulatory filing. "However, since making my investment, I now realise the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company," he had said.  

3. Twitter swallowed the 'poison pill'. Known formally as a shareholder rights plan, the poison pill would essentially give rights to existing shareholders to purchase additional shares at a discount, which would dilute the ownership of the party launching the hostile takeover bid. The poison pill will be triggered if anyone amasses a stake on Twitter of more than 15 per cent.  There is a reason why it is called a 'poison' pill though. This is a very unpopular move among shareholders because there would be a flood of new shares and they would face an erosion of value themselves, even as the hostile party's stake is diluted.

4. Twitter's board know there is no way out for them. They are stuck between a rock and a hard place. There is reported to be massive anger within the company against Musk's more libertarian approach to social media and free speech—one report claimed there were worries amongst employees that formerly banned users like ex-US president Donald Trump could make a comeback on the platform. At the same time, Musk's take-it-or-leave-it bid is a hefty 35 per cent premium (compared to April 1 close price of Twitter), and rejecting the offer could open the Twitter board to all sorts of litigation from other shareholder groups. If you are a board member in a public company, you have a fiduciary responsibility to act in the best financial interests of shareholders—Musk has already warned that he will exit his stock positions if the takeover bid is rejected, and this dump could lead to a heavy dip in the share values. 

5. Twitter board accepts Musk bid after several rounds of negotiation. 

TAGS

📣 The Week is now on Telegram. Click here to join our channel (@TheWeekmagazine) and stay updated with the latest headlines