Finally, it’s Elon Musk’s Twitter, and the bluebird is set to get a brand new identity in the world of free speech. The takeover was not a picture-perfect deal from any angle. A high-stakes legal battle by both parties, allegations, and counter-allegations mired the deal with controversies.
It’s not sure what caused Elon Musk to initially back out from the $44 billion deal to buy the company, whether it was the high premium or the issue of the percentage of spam accounts in the system. It could be both, but he knew that the costs would be higher if the deal didn’t materialize or he lost the court battle.
Let’s check how the Elon Musk Twitter drama unfolded in the last six months until the acquisition.
The Tale of Twitter’s Spam Accounts
The real bone of contention was the share of spam accounts or the bots in the system that manipulate users’ responses.
In a filing to the US stock market regulator, SEC, on Jul 8th, 2022, Elon Musk said that he wanted to terminate the deal as he was misled during the negotiation and Twitter was in “material breach” of their agreement by not disclosing the necessary information on fake or spam accounts.
Spam accounts or bots are fake and inauthentic accounts that imitate users’ behavior on the platform and are automated. The bots tweet at people, retweet, follow people, and are followed by people. As a result, they are challenging to detect or identify.
Not all spam bots are bad. Some useful spam bots provide helpful information upon request or the happening of an event. For example, @mrstockbot gives real-time stock price updates on recommendations for a stock quote. Or, the @earthquakebot updates whenever an earthquake measuring higher than 5.0 on the Richter scale happens worldwide.
However, bad actors mostly use spam bots to influence users’ decisions, sow division among communities, or for other nefarious purposes.
Since Twitter went public in 2013, the company has maintained that the share of spam bots in the system is roughly five percent. However, Musk feels the percentage is much higher, and the company is not transparent with him.
As Musk was facing a lengthy legal battle and Twitter was able to prove that they provided all the information related to spam bots during the negotiation process, the chances of terminating the deal got slim. And, if he lost the trial, the judge would force him to close the deal and impose interest payments and penalties, which would have increased the cost of acquisition.
Therefore, sensing the defeat, Elon Musk declared the deal to buy Twitter was back on the table. His representatives spoke with the company to redo the pricing and sought a 30% discount, valuing the company at roughly $31 billion. However, Twitter’s board refused the proposal, and Elon had to acquire Twitter at his original offer price to avert legal proceedings.
What’s Next for Twitter under Elon Musk?
Post-Elon Musk’s Twitter takeover, a slew of decisions were made by the new management that was expected including firing the entire leadership team and laying off 50% of the 7,500-strong workforce. Defending the move, Elon Musk said that the layoffs were to control costs as the micro-blogging site was losing over $4 million in a day.
Shoring up Revenues
For Elon Musk’s Twitter, the primary task is to shore up revenues and chart a clear path toward profitability. And Elon Musk has made it clear to users that there will be no free lunch for premium services like the blue tick verified sign.
For instance, Twitter will charge $8 per user monthly for a blue verification badge. The user will get priority placement in replies, the ability to post longer content, including videos, and lesser ads on the feed. The blue verification badge services will be rolled out soon for Indian users. In FY 2021, Twitter posted a net loss of $220 million and it had approximately 250 million users.
Elon Musk is a big advocate of free speech and was very critical of Twitter’s content moderation policy before the acquisition. Soon after the acquisition, Musk took away some employees’ access to specific content moderation and policy enforcement tools. He has plans to revamp the entire content moderation policy.
Content moderation policy is critical for any social media platform to prevent misinformation, inflammatory posts, and hate speech. And, with a lack of any clarity on the content moderation front, brands have stopped their advertisement spending, which has affected Twitter’s revenues.
Elon Musk’s Twitter plans to make the platform a super-tier network and offer better payout ratios to content creators. In a tweet, Musk said that the platform can beat YouTube’s 55% ad-revenue share rate with creators; however, he made it clear that brands must splurge more for the revenue shares to increase.
Many changes are coming to the platform; it is just the beginning. And, with Twitter going private on Nov 8th, it will give Elon Musk more power to bring in changes to the platform forcefully.
With the $44 billion Elon Musk’s Twitter takeover saga, which consistently grabbed eyeballs around the globe coming to an end, the next phase of developments will be even more controversial as Musk prepares the platform to be the flag-bearer of free speech. And, if anybody follows Elon Musk closely, they would know he loves to stay around the controversies.
Will Twitter become the torchbearer of free speech or get mired in controversies with Elon Musk at its helm? While that remains to be seen, what you can do is keep an eye out for Twitter.
How much Elon Musk paid for the Twitter acquisition?
Elon Musk paid $44 billion to acquire Twitter, which means a per-share cost of $54.20.
When were the shares of Twitter delisted from Nasdaq?
Twitter went private on Nov 8th, 2022, after it was delisted from Nasdaq.
Who is the CEO of Twitter?
After acquiring Twitter, Elon Musk made himself the CEO of Twitter. Parag Agrawal was the CEO of Twitter before Musk completed the acquisition.