With the acquisition of Twitter, what is Musk's calculation?

The day before yesterday, Musk reached a $44 billion acquisition deal with Twitter, ending a three-week offensive and defensive battle. The acquisition is likely to be one of the largest in the history of technology, and there are a number of intriguing details that we briefly review:

On April 4, Musk spent $2.4 billion to buy a 9.2% stake in Twitter, becoming the largest shareholder.

On April 10, Musk refused to join Twitter's board of directors on the condition that he agreed to hold no more than 15 percent of the shares and not to buy the company. The situation of seeing flowers in the fog gradually became clear, and the acquisition plan became well known to passers-by.

On April 14, Musk announced a full-fledged acquisition of Twitter for $54.20 per share.

In response, Twitter adopted a poison pill plan to defend itself, that is, by issuing preferential rights to existing shareholders, significantly diluting the acquirer's shareholding ratio and voting rights. Diluting equity can also lead to a drop in the stock price, and under the board decision of shareholders to subscribe, the acquirer may end up buying a company whose market value is pouring down like a waterfall.

Musk immediately came up with $46.5 billion in financing credentials: including $13 billion in loans from institutions such as Damo, $12.5 billion in Tesla's equity pledge, and $21 billion in cash, thus proving that the funds were in place. Combined with the social media performance and stock price of the past two years, Musk's offer is indeed very good, and the financial resources and determination have also led several major institutional investors on Twitter to turn around and put pressure on the board. From another point of view, if the acquisition fails, the major shareholders led by Musk will sell sharply, which is likely to cause an avalanche of Twitter's stock price, which will not benefit anyone, and shareholders will naturally not go with the money.

One thing to mention here is that Twitter's equity structure is very different from many Internet companies. The first point is extremely fragmented, with Musk holding 9.2% of the shares as the largest shareholder, and other major shareholders including Vanguard, Damo, Blackstone and State Street are all institutional investors. What is more interesting is that the third largest shareholder, Damo, is the financial advisor and financing institution of Musk's acquisition project, which may also be one of the reasons why Musk is inevitable.

Second, Twitter is simply not able to resist hostile takeovers, because when Twitter went public nine years ago, there was no dual shareholding structure of AB shares, which means that Twitter's founders and executives do not have super voting rights and need to strictly follow the method of one share and one vote to distribute voting rights. For the dual-shareholding structure, let's take a simple example of Meta (formerly Facebook), founder Zuckerberg holds Class A common shares and Class B shares with 1:10 super voting rights, although on the surface Zuckerberg only holds less than 20% of Meta's equity, but in fact holds nearly 60% of the voting rights, which is not included in the holdings of his allies. Google has also reformed its equity settings in previous years, in fact, it is also to ensure that the founders control the company and prevent hostile takeovers. In contrast, Twitter's founders have little say, and only One of the three founders, Dorsey, remains on the board and will leave next month under the pressure of capital.

Musk's "offensive strategy" has also been fully exerted in the acquisition. During April, Musk repeatedly published public articles criticizing Twitter's products and leadership, and his rhetoric was not very friendly. He also held high the banner of free speech and proposed a series of reform plans, including eliminating fake accounts, relaxing tweet censorship, and open-source algorithms, but only if Twitter was privatized. However, this has also triggered questions and speculations from major media and netizens. Here we do not do malicious speculation, just as one of the strategies of the big guy bargaining.

The acquisition is likely to have a significant impact on global commerce, after all, involving chaebols and Internet power, combined with political power, what will be the result? Hope is not increasingly difficult to limit monopolies and violence. The value of Twitter to Musk should not be more than necessary, Musk has more than 80 million followers on Twitter, more than fifteen thousand tweets in the past decade, and to some extent, Twitter has almost become one of Musk's tools to govern the company. In addition to the waywardness of "I like to use you so I bought you", his greater ambitions are:

One is the Internet. The media is not a good business to make money, the advertising competition is fierce, the performance is really not good, I believe there will not be too many people expecting how much cash flow can be brought by the stormy Twitter. Holding Tesla and SpaceX has made Musk's influence surpass that of celebrities, but the Internet is an area he has always been interested in but has not been able to enter, which may be the beginning of his construction of a closed loop of business ecology. Boldly imagine that taking down Twitter, releasing incremental information, using it to launch various social media businesses, and even combining his favorite digital currency with the meta-universe, this account is not simply calculating profit and loss, but more like creating a new business ecology.

The other is politics. Compared with traditional media, Twitter, a social media company, has established a network effect of connecting hundreds of millions of users and massive information around the world, and has a wider and more powerful influence. Whether it is building electric vehicles or rockets, the public environment and good relations are very important in terms of technology, customer acquisition and supervision. No matter how deep the political demands and discourse power, Musk's heart is also clearly measured.

In the end, I have to admire Musk for being well versed in the laws of the Internet, not building his own social media, but directly buying ready-made ones, which are 30% lower than the top point of Twitter's stock price of $80. Once Trump was banned by Twitter, and launched a new version of social media in a rage, but it did not stir up any storms. This reason is like we have Sina Weibo, many people feel that there is no need to register Sohu Weibo, because creators and consumers are on the same platform is the real platform effect, it is difficult to change on their own.