In a move that stunned the corporate world, Elon Musk officially bought Twitter on April 25 for $44 billion. However, the saga of Musk and Twitter started weeks before that fateful April day. Musk acquired a 9.2% stake in Twitter on March 14, becoming the largest outside shareholder of the company. In early April, it seemed that Musk would join Twitter’s board, but he decided not to join because he would have had to follow rules against disparaging Twitter as a company. On April 14, Musk announced that he wanted to buy the whole company at $54.20 a share, a large premium to the share price at that time.
Twitter responded with a “poison pill” maneuver the next day. The “poison pill” is a corporate strategy used by companies since the 1980s to defend against would-be acquirers. The maneuver made it so that if Musk, who had a 9.2% stake in the company, acquired a stake greater than 15%, Twitter would inundate the market with shares at a discounted price available only to shareholders (not including Musk). The cheap shares would be swiftly bought by shareholders incentivized by the low price, diluting Musk’s stake (more total shares means less stake in the company per share). Twitter reasoned that with more shares on the market, it would become too expensive for Musk to acquire them. This did not shake him.
Musk continued his efforts to secure financing for the deal. Morgan Stanley and other lenders offered $13 billion in debt financing. Debt financing is the practice of selling debt instruments, such as bonds, to raise money. In this case, Musk sold debt instruments to Morgan Stanley to raise money for the deal. The lenders also offered $12.5 billion in loans against Musk’s Tesla stock as collateral. In addition, he provided $21 billion of his own personal equity. Finally, on April 25, he officially bought Twitter.
Musk sought after Twitter for a variety of reasons, but one he has repeatedly emphasized is free speech. He has claimed that Twitter’s content moderation are restrictions on free speech and should be more lax. He has specified that he is talking about free speech within the bounds of the law. By focusing on free speech, Musk portrayed himself as a defender of democracy, even though once he takes Twitter private, he will have extraordinary powers to mold the platform into whatever he wants (private companies enjoy less regulation from government agencies such as the SEC). He also wants to make the Twitter algorithm, which decides which posts are shown to which users, open source, a move that he hopes will increase trust in the platform. Other goals he has for the platform are creating an edit button for tweets and defeating spam bots. He has also discussed the idea that Twitter users should pay for Twitter Blue – the platform’s premium subscription – with Dogecoin, a cryptocurrency he has repeatedly promoted.
Effects on Stocks
Both Tesla and Twitter stock were fluctuating throughout the negotiations of the deal. Tesla stock dropped 19% from the beginning to the end of April, the month in which Musk announced his intentions and successfully acquired Twitter. The drop in Tesla stock can be attributed to fear from investors that Musk would sell off large portions of his Tesla stock to pay for the Twitter acquisition, which would cause the stock price to drop. Additionally, investors worried that Musk’s focus would shift away from Tesla towards Twitter, which would cause the electric-vehicle producer to falter. Twitter stock has also been in flux for the past couple months, mainly over uncertainty created by the deal. Notably, Twitter stock rose on April 25, the day that the deal went through. This may show investors’ confidence in Musk’s ability to lead Twitter successfully.
Increasing Power of Billionaires
Not since the Gilded Age, when Rockefeller and Carnegie ruled industry with iron fists, have billionaires held so much power over society. Elon Musk, Jeff Bezos, and Mark Zuckerberg are emerging to be the Rockefellers and Carnegies of our generation. Though each man is known for Tesla, Amazon, and Meta respectively, their influence reaches far beyond just one company. By buying Twitter, Musk has given himself a pulpit from which he can preach whatever message he would like. This is not too dissimilar from Bezos, who bought the Washington Post in 2013. Mark Zuckerberg is currently solidifying his control on the metaverse, ensuring he controls the narrative and the future of the industry. While these billionaires are accomplishing great things, one wonders how such large amounts of power concentrated in the hands of a few can coexist with a democracy.