This article first appeared in The Edge Malaysia Weekly on April 18, 2022 - April 24, 2022

WHAT would you do if you were the world’s richest person with a net worth north of a quarter of a trillion US dollars? What if you were an accomplished innovator who owned a 17.6%, or US$178 billion (RM753.8 billion), stake in the world’s most valuable car company, a stake worth US$80 billion in the world’s most valuable space company, as well as other ventures, including a transportation tunnel builder called The Boring Company, but grew bored?

To avoid boredom, you might keep yourself busy by tweeting more to your 81 million or so followers around the world. You might champion the cause of free speech and perhaps even poll your followers on whether they thought there was a need for setting up an alternative social media firm — an improved version of Twitter, the operator of the microblogging platform.

For more than a week now, electric vehicle (EV) pioneer Elon Musk, CEO of Tesla Inc and SpaceX, has mesmerised the business and tech worlds with his antics on and at Twitter. The mercurial billionaire tweeted on April 3 that he had purchased 9.2% of Twitter’s stock, becoming its largest shareholder. When the world’s richest man becomes a substantial shareholder of your company, you lay out the red carpet rather than try to fight him off. Twitter CEO Parag Agrawal promptly invited Musk to join its board.

That led to a week of weird tweets — including suggestions to turn Twitter’s San Francisco headquarters into a “homeless shelter” as well as to remove the letter “w” and rename the firm Titter — and Musk abruptly changing his mind and declining the board invitation. The about-turn came after Twitter informed Musk that he would have to go through “background checks” before taking up his seat in the boardroom. Why would the world’s most scrutinised person agree to background checks?

On April 14, Musk announced that he was making an all-cash offer to take Twitter private at US$54.20 a share, valuing it at US$43 billion, or a 54% premium over the day before he began investing in Twitter. “My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder,” he told Twitter’s chairman Bret Taylor in a note. It was a “take-it-or-leave it” offer. “I am not playing the back-and-forth game,” he wrote. “I have moved straight to the end.” Clearly, he had put Twitter in play.

Twitter’s stock initially surged 13% in pre-market trades but ended the trading day 1.68% lower, or 17% below the offer price. The market was essentially saying Musk’s unsolicited offer was dead on arrival. Jefferies & Co internet analyst Brent Thill believes the offer was a tad too low. US$60 a share, or US$48 billion, might clinch the deal, he argues.

Here’s why the microblogging platform that encourages users to share posts, or 280-character tweets, matters: It is the internet’s loudest — and, arguably, most effective — megaphone. Its growing horde of fans view it as a global public square. Journalists get their news from Twitter; CEOs, celebrities, politicians and marketing wizards use it as a platform to disseminate information and ideas or pour out random thoughts in real time. It is also used to pump out misinformation, partisan propaganda as well as abusive content ostensibly to drive engagement.

Is Musk really serious about privatising Twitter? If he is, why does the market think it is just a game for him? And, if he is indeed serious, can he pull it off? Musk is currently worth US$259 billion. His Tesla stake is worth just over US$178 billion at current market prices and his SpaceX stake was valued at more than US$80 billion at the last funding round. Buying Twitter would hardly make a dent in the net worth of Musk, who made more than US$50 billion in capital gains in March alone. He is not a big spender with a lavish lifestyle. He often sleeps in his office or at the home of his girlfriend, Canadian musician Grimes, or in the guest room of one of his pals.

A net worth of US$259 billion makes you wealthy but it does not mean you have the money to fund a US$43 billion takeover. Asset-rich, cash-flow-poor Musk could pledge his Tesla shares as collateral to raise the money or sell part of his SpaceX stake to fund the deal. He could bring private equity groups or wealthy billionaire pals such as software giant Oracle’s founder Larry Ellison as partners. Unfortunately, Musk has a history of trying to take companies private without financing lined up. In August 2018, he tweeted that he was considering taking Tesla private at a split-adjusted US$84 a share: “Funding secured.” The US Securities and Exchange Commission, or SEC, charged him with making “false and misleading” statements. Musk and Tesla agreed to pay US$20 million each in fines.

For its part, Twitter has long been the poster child of poorly run internet firms. It has had little or no product innovation to show, and user growth has been anaemic. Its stock is virtually where it was the day after its IPO in 2013 whereas tech benchmark, the Nasdaq 100 Index, has nearly quadrupled. Most of the real value over the past nine years has accrued to the people who tweet, rather than to Twitter or its shareholders.

Twitter has nearly 340 million users and its 2021 total revenues were US$5.1 billion. Jefferies & Co expects revenues to grow 20% this year and 25% next year, following 37% growth last year. On average, the platform’s users have far higher incomes than users of rival social media platforms such as Instagram, Facebook, Snap and WhatsApp.

Twitter’s problem has been that it has been unable to monetise its reach the way Instagram and Google, for example, have. Musk believes he can fix Twitter. His strategy is simple. First, make Twitter better for users. As an avid tweeter, he knows what users want. Second, Musk wants to end Twitter’s dependence on advertising. Among other things, he wants Twitter Blue, the newly launched paid subscription service, to be completely ad-free because advertisers’ “power to dictate policy is really enhanced” if a company relies on their ads. Video-streaming service Netflix Inc has shown that a subscription model can be as good as — and even better than — an advertising-based model.

The problem is that 89% of Twitter’s revenues currently come from advertising. If you choke off the ads, Twitter becomes unviable. But Musk is not arguing that advertising should be banned from the entire platform. He just wants the paid subscription part of the platform to be ad-free. By cutting the subscription fee from US$3 a month to US$2.50 a month, Musk believes it can attract more paid subscribers. Even if just half of Twitter’s current 217 million daily active users subscribe to the paid service at US$2.50 a month, it would generate revenues of about US$3.25 billion, or more than two-thirds of Twitter’s annual ad revenues last year.

Musk has talked about the necessity of having an “Edit” button on Twitter. Right now, you are not allowed to edit your tweets if you change your mind and want to sanitise or update them, something that CEOs and politicians would love to do.

Musk has also tweeted about making Twitter’s algorithms “open-sourced”. Social media algorithms are built to maximise engagement, which in turn helps bring in more advertising. You can get a bigger crowd if you scream louder or say nasty things. Yet, a toxic platform drives advertising away. Musk’s worry has been that Twitter’s own algorithm’s moderation control can and does guide conversations in a harmful way. By taking those controls away through open-sourced algorithms, Twitter will help solve thorny issues such as maximising engagement through more toxic conversations.

A self-described “free speech absolutist”, Musk has been very vocal about retaining Twitter’s role as a public square where free speech can thrive. “Free speech is essential to a functioning democracy,” he tweeted two weeks ago as he asked his followers whether they thought Twitter “rigorously adheres to that principle”. Twitter suspended the account of former US president Donald Trump in January 2021 in the aftermath of the US Capitol attack. Trump is reportedly toying with the idea of running against his successor President Joe Biden in 2024. Some analysts believe Musk might be talking up “free speech” only to help Trump get back on the platform. The former president had 88 million followers when he was suspended. Getting one of its most famous users back might help draw more paid subscribers to Twitter.

There is no shortage of billionaires who might want Twitter to be the public square for their own purposes. Conservative billionaire Peter Thiel, a close confidant of Trump, co-founded fintech firm PayPal Holdings Inc with Musk. Trump, whose own social media platform Truth Social has had teething problems, desperately needs a viable public square such as Twitter to mount a comeback. Thiel, who has poured tens of millions of dollars into this year’s Congressional elections to prop up Republican candidates, already owns a substantial stake in the free speech-oriented video-streaming site Rumble Video, a sort of YouTube for pro-Trump MAGA — or Make America Great Again — fans.

Some analysts argue that Twitter will be a distraction for Musk’s crown jewel, Tesla. The company’s investors are concerned about whether he would be fully focused on EVs as competition ramps up over the next 18 months. Moreover, China is now a huge part of Tesla’s growth story. If there were to be something controversial about China on Twitter and Beijing does not like it, will Musk be able to walk the tightrope of balancing China’s concerns and Twitter’s needs? If he were forced to choose between defending free speech on Twitter and Tesla’s business interests in China, what would he chose?

Despite being the world’s richest man, Musk has long been frustrated that he has not been given the respect he deserves. By taking control of the world’s loudest megaphone, he can ensure that he will get heard. Twitter has also been a key tool for him to communicate with his 81 million loyal followers. Without those followers, Tesla would not be where it is today and Musk would be a second-tier billionaire running a fledgling EV maker. The rich yearn for more power just as much as the powerful desire more wealth. Musk is no different from anyone else.

What’s next? If Twitter’s board rejects Musk’s offer, the stock could collapse 25%. He will stop tweeting, which means it will lose one of its most prominent tweeters. Clearly, it will not be the same platform again. “I’m not sure I will be able to acquire it,” Musk conceded on April 14. If the board rejects his offer, Musk says he has a “Plan B”.

Twitter’s board is reportedly mulling a “poison pill” defence to prevent Musk from grabbing control. It needs to tread cautiously as it navigates the takeover offer. Twitter  will face shareholder suits no matter what happens. The board collectively, and the directors individually, might want to be more attentive to legal advisers than investment bankers as the saga moves to the next phase.

Musk, who is famous for his short attention span, might just get bored with Twitter and move on. There are always other shiny things that might draw his attention. Last week, he posted a meme that read: “In all fairness, your honour, my client was in goblin mode” — as if he was imagining he was in a courtroom defending his recent actions. He quickly deleted it. “Goblin mode” can be described as a way of life that gives people permission to ditch societal norms and embrace their basic instincts. Essentially, Musk was saying that he really does not care what people think of what he says or does. Whether he succeeds in buying Twitter or fails, the world’s richest person can afford to be in goblin mode all the time.

Assif Shameen is a technology and business writer based in North America

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