Assuming Twitter is a car, Elon Musk, who used to sit comfortably in the back seat (81 million followers), moved to the front seat this year (9.2% stake), and recently he felt that driving himself was also good (tender offer).
According to the disclosure in early April, Musk is currently Twitter's largest shareholder, holding more shares than major shareholders such as the company's co-founders Jack Dorsey and Vanguard Group. On April 12, after Musk made his decision not to join Twitter's board, there was analysis and speculation that he was going to buy it, because according to Twitter's rules, if he was on the board, he could not hold more than 14.9% of the shares. That is, as a board member, Musk can't buy Twitter. Now the situation is clear.
On April 14, Musk gave an offer of $54.20 per share, a 18 percent premium to the previous day's closing price, with a total valuation of $43 billion. As CEO of Tesla and SpaceX and the world's richest man, Musk's fortune is estimated at $259 billion.
On the 14th, Twitter's board of directors and all employees will discuss Musk's proposal, and Goldman Sachs will also review his offer.
(Elon Musk)
Typical of Musk's style, he emphasized that it was the best and ultimate bid and hinted that he might exit the investment if the deal hadn't been struck, "If the deal doesn't work out, given that I don't have confidence in management and don't believe I'll be able to push for the necessary changes in the open market, I'll need to reconsider my position as a shareholder." ”
Still, there are other major shareholders who have rejected Musk, and Saudi Prince Alwaleed bin Talal said he doesn't think Musk's offer is close to Twitter's intrinsic value given Twitter's growth prospects.
Musk has hired Morgan Stanley as his financial advisor. He mentioned in the just-concluded TED conversation that he had "enough" assets to buy Twitter and that he could buy it "technically"; if the offer was rejected by Twitter, he had an alternative plan, but did not elaborate.
What's going on on Twitter?
(Twitter co-founder Jack Dorsey)
In 2006, Twitter was founded by Evan Williams, Jack Dorsey and others, and the user growth was good; in 2013, Twitter went public for $25, and the stock price soared to $44 that day. But since then, investor returns have been low due to the company's difficulty in earning.
Co-founder and former CEO Jack Dorsey is also a legend: 45 years old, with a long beard, nose rings, cryptocurrency advocate, philanthropist. In 2008, Dorsey was dismissed by Twitter for some management problems; in 2015, he returned and became CEO again. If it were not for the impact of the epidemic, he might have chosen his place of work in Africa in the past two years.
In early 2021, Twitter shut down a Trump account with more than 80 million followers was a big deal, but dorsey was in French Polynesia at the time, and he let the deputy make the decision. One of Dorsey's management styles is to delegate important decisions to subordinates, and he doesn't think that a company led by a founder is necessarily going to have a positive effect, "At the end of the day, I think [the founders leading the company] bring serious limitations and become a factor that leads to failure." ”
At the end of 2021, Dorsey resigned as CEO and CTO Parag Agrawal was promoted to new CEO. It's not uncommon to select a CEO from a technical role.
(Current CEO of Twitter Parag Agrawal)
Dorsey's departure is somewhat related to the last external crisis. Dorsey is also the co-founder and CEO of digital payments company Square, and even recently doubled the market capitalization of Square (Block) than Twitter. There are activist investors who pressure that Dorsey has failed to juggle the two companies and that Twitter must change. During that time, Musk tweeted a heart-shaped emoticon in support of Dorsey.
Twitter does face some business dilemmas.
In 2021, Twitter revenue was $5.08 billion, up 37% year-over-year. An operating loss of $493 million and an operating margin of -10%, including $766 million in litigation-related expenses. Adjusted operating profit, excluding litigation-related expenses, was $273 million, representing an adjusted operating margin of 5%. Net loss for 2021 was $221 million and net loss was $1.14 billion for 2020.
(Twitter vs. competitor market capitalization)
According to the plan, Twitter hopes to achieve revenue of more than $7.5 billion and mDAU of more than $315 million in fiscal 2023, but this goal is quite aggressive. To achieve the latter user target, the company needs to grow at a CAGR of 20% from 2021-2023 and 19% from 2019-2021. The reality is that because of the pandemic, the user growth rate in fiscal 2020 was 26%, and then slowed to 13% in fiscal 2021, and the mDAU target of 315 million in fiscal 2023 is not easy.
In terms of revenue, more than $7.5 billion by fiscal year 2023 will require a compound annual growth rate of 22% for 2021-2023, compared to a compound annual growth rate of 21% for 2019-2021. In summary, achieving the revenue target for fiscal year 2023 requires growth on all fronts, including revenue, users, and earnings. Wall Street analysts predict that Twitter will meet these revenue and user targets in 2025 and 2027, respectively.
What does Musk want to do?
(Elon Musk)
Twitter is struggling to make money, and Musk is thinking about "free speech."
After bidding, Musk said: "I invested in Twitter because I believe it has the potential to become a platform for free speech around the world, and I believe that freedom of speech is a necessary condition for a democratic society." Ever since I made the investment, I now realize that it will neither flourish nor serve this societal need in its current form. Twitter needs to be transformed into a private company. ”
Over the years, heavy user Musk has used Twitter to share company information, discuss, quarrel, and the most well-known thing is that in 2018, he suddenly claimed to take Tesla private, and was accused by the SEC, and he and Tesla each paid $20 million to settle.
Earlier, Musk also criticized Twitter in a tweet, conducting a poll on whether Twitter complied with free speech, and the result was that about 70% of netizens believed that Twitter did not do it. On March 24, Musk launched a poll asking them "whether the Twitter algorithm should be open source." Dorsey then retweeted Musk's investigation, saying that "everyone should have a choice about which algorithm to use (or not to use)." ”
Musk also suggested that Twitter shift its focus from an ad-based business to a subscription business, such as $2/month, arguing that this would survive the platform.
However, this time Musk made an offer to buy Twitter on the grounds of "freedom of speech", and the opposition was not small. Some opponents point out that Musk has never been an advocate for free speech, he advocates reckless speech. Freedom of speech, enshrined in the U.S. Constitution, is a government that can't infringe on people's right to speak; it has nothing to do with rules enforced on platforms like Twitter, or whether others will get angry about what he says. Musk doesn't care about respecting the rhetoric of others, he just doesn't want to be blamed for abusing the power of a CEO; he just wants a world without regulations or restrictions where powerful and wealthy people are unstoppable.