A meme that’s been popular on social media for several years features two photos posted side-by-side. One is labelled “How it started” and the other has “How it’s going.”
This meme has typically been used for light-hearted posts about relationships, marriages, children and so forth.
It could be used for other purposes – maybe a bizarre love-hate relationship between a billionaire and a social media giant, for instance.
That’s what’s happening between Elon Musk and Twitter.
The brilliant and eccentric entrepreneur, who founded successful companies like Tesla and SpaceX, has been aggressively purchasing shares of Twitter on the open market for several months. On April 4, he became the largest shareholder after acquiring a 9.2 per cent passive (or non-active ownership) stake in the social media platform.
Passivity turned into activity within 24 hours. Twitter announced that Musk would join its board of directors. In return, he agreed not to purchase more than 14.9 per cent of the company.
That’s how it started.
How’s it going?
That’s a different story.
Musk’s appointment to the board, scheduled for April 9, was abandoned on April 10. “I believe this is for the best,” Twitter CEO Parag Agrawal tweeted. “We have and will always value input from our shareholders whether they are on our Board or not. Elon is our biggest shareholder and we will remain open to his input.”
What caused this about-face?
Although never officially announced, it likely had to do with some tweets Musk wrote on April 9. One was a crude joke changing the company’s name by removing the “w” from Twitter. The other was more serious, noting that among the most followed Twitter users, including former U.S. president Barack Obama and musicians Justin Bieber and Rihanna, “most of these ‘top’ accounts tweet rarely and post very little content. Is Twitter dying?”
Musk then upped the ante.
On April 13, he offered to purchase Twitter for US$43 billion and take it private. As noted by Bloomberg’s Giles Turner and Maxwell Adler on April 14, this meant the “world’s richest person” would pay Twitter “$54.20 per share in cash, 38 per cent above the price on April 1, the last trading day before Musk went public with his stake.”
Can he afford it?
The entrepreneur is worth an estimated US$260 billion but it will surely involve a major reshuffling of his personal fortune.
Scott Galloway, a professor of marketing at New York University’s Stern School of Business who hosts a podcast with tech journalist Kara Swisher, told listeners that Musk “can’t afford this.”
Why?
He has US$2.95 billion in “cash,” according to the Bloomberg Billionaires Index. The rest is evidently tied up in his business empire.
Financing could involve several options. “The first is with debt,” Galloway noted, “and he can’t because his company has no EBITDA (i.e. earnings before interest, taxes, depreciation and amortization). No firm is going to loan him more than a billion or a few billion dollars, so he has to come up with $40 billion in equity.”
He could ask colleagues for a loan, but his financial ‘buddies’ are more concerned about earning profits than preserving free speech – one of Musk’s main objectives in purchasing Twitter.
“Really, the only viable source of financing here is for him to borrow against his shares in Tesla,” the marketing professor said. The US$43 billion would be borrowed against Tesla’s equity value of US$200 billion to US$300 billion. However, “no single bank is going to be the bank … they’ll do their analysis and go ‘if the s–t gets really awful here, we are not going to be the bank that’s taken down by this guy’s mania.’”
Galloway also made this straightforward assessment: “You know whose stock goes down if this deal were to somehow go through and he would raise money against Tesla shares? Tesla’s stock would tank.”
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Musk hasn’t commented on this analysis. He may never address it.
Purchasing Twitter involves a huge risk for Musk’s net worth and investments, but that’s been his raison d’être for decades. The social media platform’s value has increased since this offer, which benefits the company and, yes, its biggest shareholder.
And Musk’s strong defence of free speech is important and admirable.
Will Twitter accept this offer?
Based on the 15 per cent “poison pill” the company imposed on Musk and other shareholders, it seems unlikely, but anything is possible.
Will Musk start a pro-free-speech competitor to Twitter if he doesn’t buy it?
I and several others have suggested this could be his master plan.
If that’s the case, Musk and Twitter’s meme will be an even more memorable one.
Michael Taube, a Troy Media syndicated columnist and Washington Times contributor, was a speechwriter for former prime minister Stephen Harper. He holds a master’s degree in comparative politics from the London School of Economics. For interview requests, click here.
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