Elon Musk, the world's richest man, announced on Twitter the final deal to buy social media company Twitter for $44 billion at $54.2 per share. It's a pre-sale agreement that has now been endorsed by Twitter's board of directors, but still needs regulatory approval, and the deal will eventually close by the end of 2022.
The deal came shortly after Musk bought a 9.2 percent stake in the company on April 4. At the time, Twitter's share price was below $40 a share. Twitter's board was initially reluctant to accept the takeover, and even developed a "poison pill" plan to protect the company from what it saw as hostile acquisitions. But in the first three days of the deal, Twitter executives have already been enthusiastic about discussing the deal, as Twitter's stock price has risen 35 percent since Musk announced plans to make the deal, more than $52 a share.
What kind of company is Twitter?
Twitter is a loss-making but most influential social network used by presidents and businessmen whose Twitter often changes market conditions and the fate of companies.
Twitter is losing money. In 2021, although its revenue increased by 37% to $5.08 billion, the net loss totaled $221 million. The loss in 2021 is five times lower than in 2020. In 2020, Twitter lost $1.14 billion. Twitter's shareholders have been holding out hopes for the positive growth of the social network since the beginning of the coronavirus pandemic, with 315 million people expected to use Twitter every day by 2023. In 2020, the number of people using Twitter every day was 192 million.
At the end of 2021, Twitter founder Jack Dorsey resigned as CEO because shareholders were unhappy with him, believing he was busy with other projects and spending little energy on Twitter to meet their expectations.
Twitter is extremely influential. Presidents, politicians, and well-known entrepreneurs make statements and share their views on it, and investors and traders follow their activities. Once upon a time, Twitter destroyed what seemed to be very stable companies' stock prices hundreds of times, or, conversely, brought unknown startups to the top.
How Trump's tweets affected the market
On April 11, 2018, Trump wrote: "Russia will shoot down any missile launched from Syria." Get ready, Russia, because they will come, pretty, brand new, smart. Shares on the Moscow Stock Exchange plummeted immediately, and, after Trump's negative tweets, the ruble depreciated by 4-10 percent in three days.
In February 2019, he complained that "oil prices are rising too much" and "the world can't afford to see prices rise", and asked OPEC to "relax". Since then, WTI's price has fallen by $1.80 a barrel, and Brent's fall has been almost $3. Oil Tweets is a series of separate series of Trump social events.
In August 2019, Trump announced on Twitter that he would raise China's $250 billion import tariff from 10% to 25%. After that, the global stock market value fell by $1.36 trillion, and China's stock market fell to its lowest point in three years. The tweet had a total of 102 words, and each word cost investors $13 billion.
There are also scattered posts that have nothing to do with China, Russia, and oil. In December 2016, Trump tweeted: "The development plan and cost of the F-35 fighter jet have gotten out of control, and military procurement after January 20 will save billions of dollars." After that tweet, the F-35 producer, Lockheed Martin, fell $3.5 billion in market value. Earlier, Trump said that the construction cost of Boeing's new presidential jet was too high, resulting in a $1.4 billion reduction in Boeing's market value.
In fact, Twitter has been influenced by Trump. In 2018, he wrote: "Twitter imposed a 'shadow' ban on key Members of the Republican Party, and we will examine this discriminatory practice." On the same day, Twitter released a report saying that it should lose 1 million active users. The next day, Twitter's stock price fell 14 percent, though it's hard to tell what affected Twitter's stock price more, whether it was the report or Trump's post.
How Hillary Clinton lowered the stock prices of pharmaceutical companies
Few politicians can match Trump's use of Twitter to influence the economy, but in 2015, Hillary Clinton angrily suppressed the capital of drug manufacturers on Twitter.
At the time, Turing pharmaceutical company provoked the indignation of Americans, which bought the right to produce several popular drugs and raised prices sharply. The price of a drug to treat AIDS has risen from $13.50 to $750, costing some patients hundreds of thousands of dollars a year. Hillary Clinton promised on Twitter: "Tomorrow I will come up with a plan to address this challenge." While Turing's stock wasn't traded on the exchange, shares of other pharmaceutical companies immediately began to fall, with investors seeing Hillary's words as a promise to overhaul the industry, with the Nasdaq Biotech index down 4.41 percent.
Little Kardashian "dropped" Snapchat
To influence the economy, you don't need to be a businessman or politician, as long as you have enough fans. In 2018, Kelly Jenner, the youngest of the Kardashian sisters, tweeted that she didn't like Snapchat's new design, when she had 24.5 million followers. After fans took notice of the tweet, Snapchat's market capitalization fell by $1.3 billion.
Musk's tweet
Bitcoin soared to $5,000 in an hour after Musk posted a crypto tag on his Twitter account on Jan. 29.
At the end of January, Musk tweeted: "Tonight at 10 o'clock at the Los Angeles club." There, he interviewed Thorneve, CEO of Robinhood, and spoke about his startup Neuralink. Since then, the lesser-known social network, which is mainly used by Employees in Silicon Valley, has topped the startup charts.
According to a Survey by Pipsay, at least nearly 40 percent of U.S. investors invest based on Musk's tweets. 16% of respondents said they were guided by his Tweets multiple times, and 21% made an investment or two. 64% of respondents follow his Twitter account, and 43% follow closely.
At the same time, Twitter has also become a problem for Musk and his startup, causing him to lose his chairmanship of the board of directors of startup Tesla.
In 2018, he announced on a tweet that he was considering taking his public company Tesla private, to buy shares from the exchange for $420. After this announcement, Tesla's stock began to rise. The U.S. Securities and Exchange Commission (SEC) began an investigation that argued that Musk's statement had misled investors and enticed others to buy the stock at an exorbitant price. The SEC was also curious about Musk's suggestion on Twitter rather than in official documents, and began investigating whether the claim was true and whether he had enough money to buy the stock. Eventually, Musk explained a lot on Twitter and gave up his intentions, losing his position as chairman of the board. He also struck a deal with the SEC, pledging not to disclose important information related to Tesla's work "without prior approval."
Why did Musk buy Twitter?
A Twitter regular with more than 81.5 million followers, Musk is best known for his tweets, however, it was some of the aforementioned tweets about Tesla that got him into legal trouble, prompting him to "seriously consider" setting up his own social media platform. 20 days later, he began buying Twitter.
Twitter once called itself the "Freedom of Speech Wing of the Freedom of Speech Party," but it is no better than Facebook, YouTube, Reddit, or any other platform when it comes to protecting political speech. In the American public's mind, Twitter deviated from its original mission. But Twitter still has an advantage: Journalists, politicians, and a wide variety of influencers use the platform as their primary means of disseminating ideas and discussing current affairs, and as a de facto marketplace for opinion, Twitter was, and still is, the most influential space for political discourse.
Like his vision of commercial spaceflight, internet satellites and electric vehicles, Musk sees not just Twitter's present, but its future.
"Free speech is the cornerstone of a functioning democracy, and Twitter is a digital city square where people discuss issues that are vital to the future of humanity," Musk said in a statement announcing the acquisition.
"I hope even my harshest critics will stay on Twitter because that's what free speech means," he said, adding that Twitter has great potential to achieve this and must become a platform that is trusted by the public around the world, offering everyone the freedom to express their positions. Contrary to the screams and bashing of those narrow critics, free speech does not mean a complete abandonment of the moderation of positions, turning the platform into an anarchist mess. What it means is that if someone is banned, they will know why they are banned, and, ideally, moderate policies will not be driven by ideologies or personal motives.
Twitter's founder, Jack Dorsey, said he regrets that as a public company, Twitter actually belongs to investors and advertisers, and "getting it off Wall Street is the right first step."
Musk said he "doesn't care about Twitter's economics, buying it isn't about making money," but the first chapter of overhauling Twitter to fit the ideal "digital city square."
How will Musk change Twitter?
"I hope to make Twitter better than ever by enhancing the new features of the product, making the algorithm open source to increase trust, defeating spam bots, and authenticating everyone."
According to Musk, the first thing Twitter has to do is expose the algorithm. This will allow users to see if their tweets are artificially throttled or pushed, and exposing the algorithm will help prevent behind-the-scenes manipulation. If users are banned, they need to know why they are banned and how they are breaking the rules. He believes that this will increase user confidence in the platform.
Content push and content throttling are seen as the twin devils of content-driven algorithms – at the heart of every social media platform today.
As a digital city square, users should be free to discuss any issue, no matter how sensitive, transgenderism, pandemics, conflicts in Ukraine, climate change, elections, and more. Everyone should be allowed to criticize anyone without fear of retribution from the system, and it's not just those on the system's designated target list who have the right. May truth triumph over falsehood.
Facts don't care about your feelings, and Twitter has no right to legislate for your opinions or facts. As a platform for free speech, Twitter must remain neutral on political issues, and even if there are both right and wrong sides, people must be free to decide what they believe, for or against, rather than being forced to adopt an opinion by hidden algorithms and ideologically biased content censorship.
There is no doubt that Musk will face challenges from within Twitter, as he wants these algorithms to be open source and reveal their internal workings to every snooper and programmer on the Internet.
Twitter's board members and investors will be his smallest problem, and the muttering will come from everyday content managers, programmers, and middle-level management decision makers who invent algorithms, issue bans, and facilitate their actions through the company's internal culture. Musk had to clean the room.
Thankfully, with full control of the company, Musk can do just that. He didn't need to drain the swamp, he just needed to break the dam and let it flow freely. If in doubt, he can fire any rogue employee who refuses to cooperate with the procedure.