Musk’s Twitter u-turn is the beginning rather than the end
When news broke that Elon Musk would be moving ahead with his original $44bn takeover of Twitter, it felt like the beginning of a saga rather than the end of it.
While the Tesla chief told his 107m followers that the purchase would be an “accelerant” towards his vision of an “everything app”, Musk’s lawyers remain acutely aware of the challenges that lay ahead of them.
In a letter from Musk’s team, he said: “Musk Parties intend to proceed to closing of the transaction… and adjourn the trial and all other proceedings.”
Twitter notably stopped short of saying whether it would be dropping its lawsuit against the businessman, with a scheduled deposition still due to go ahead this week.
The general consensus amongst legal experts is that Musk wasn’t going to come off well at trial, and losing in court could potentially mean Musk was not only forced to close the deal on the $54.20 per share offer, but also fork out additional interest payments.
“What Musk’s move shows is that the stakes proved too high, and he didn’t want to be on the losing side,” social media analyst and industry commentator Matt Navara told City PM
On top of this, the other elephant in the room is actually financing the deal: something that tech analyst at Mirabaud Neil Campling said was precariously up in the air.
Although the billionaire secured a financing commitment to provide a $12.5bn margin loan and offloaded $8.5bn worth of Tesla shares, the tumultuous market may prove complex for Musk to navigate.
“The cost of debt has gone up so much since the initial purchase offer, it is uncertain whether Musk will even be able to pay up without selling off even more of his Tesla stock,” he told City PM.
He explained that even if the deal does go ahead, it would leave Twitter highly leveraged, which he said was “the last thing you want in this market”.
However, Twitter shareholders have already approved the sale, meaning that if Musk is able to push past the other hurdles, he could be on the home straight.
What could Musk’s Twitter look like?
From what Musk has already said content moderation will be heavily loosened under Musk’s watch, heralding a new era of free speech and welcoming back long-time outcast Donald Trump.
“I think that was a mistake, because it alienated a large part of the country and did not ultimately result in Donald Trump not having a voice,” Musk said back in May.
Given the fuss he has made about Twitter’s bot count, he is also likely to clamp down on fake accounts and double-down on boosting profitability. For Musk, this means shifting away from the reliance on advertising, which has chipped away at Twitter’s recent quarterly results.
However, the major concern here is that he could be fighting a losing battle with the growing dominance of rival firms like TikTok, which just this week revealed its European turnover had surged almost six-fold in 2021.
With this in mind, Musk’s desire for an “everything app”, which is reminiscent of China’s super apps Weibo and WeChat, may not be such a bad idea.
Snap’s chief Evan Spiegel said earlier this year that he thought the idea was “compelling”, saying that he’d even consider adopting this all-in-one app for Snapchat users.
Nonetheless, until we get more clarity about what this u-turn will logistically mean, Musk’s ‘X’ social media remains a faraway dream.
Twitter declined to comment, while Musk’s legal team were not immediately available to comment.