When Elon Musk announced his $44 billion takeover bid to Twitter, it caused celebrations and meltdowns in equal measure.
Conservatives and libertarians, who have been the recipients
of step-motherly treatment on Twitter owing to its overwhelming liberal bias,
hoped Musk would liberate the platform into a haven for free speech.
Liberals feared losing control over a primary tool of
communication and manipulation. Hence, Twitter
employees staged walkouts. MSNBC said that Musk’s
takeover would have 'massive,
life and globe-altering consequences'. The New York
Times and the Washington
Post scurrilously
attacked Musk.
There were a few commentators
of perspicacity who urged cautious hope over blind optimism.
Some financial experts said that the price tag of $44bn was
much more than Twitter's actual worth.
The fact remains that despite its impact, Twitter has
struggled to generate revenue like Facebook or TikTok. This is because Twitter
hasn’t been able to seamlessly embed adverts and other money-generating tools
into its app.
Twitter was founded in March 2006 but became profitable only
towards the end of 2017. The road has continued to be bumpy despite the profit.
Twitter lost $221 million in 2021. Twitter
also revealed last month that it had suffered a first-quarter
loss and that it has ‘accidentally overstated’ its number of users since 2019.
This is why investors kept their distance from Twitter’s
stock. Prior to Musk's hostile takeover bid, Twitter's stock was worth 12 %
less than what it was priced when the firm went public around eight years back.
Last month, the news of Musk becoming Twitter’s largest
shareholder, owning a 9.2% or $3 billion, triggered
a rise of more than 27% in the company's stock price.
Just when things had settled down, there was another twist to
the tale.
A few days back, Musk caused another frenzy across social
media platforms and in financial markets when he announced that his takeover
bid was “temporarily on hold". He cited numerous fake accounts on social media
sites as the reason.
Hours later Musk insisted that he is “still committed” to the deal causing the stock price to partially rebound back to $41 from $34.
So, what is going on?
There are a few possible explanations behind Musk’s sudden
move.
Perhaps Musk realizes that his initial bid was too high and is
attempting to compel Twitter to return to the negotiating table in order to
lower the price. Legal experts say Twitter’s board would risk being sued if
it agreed to a lower price without serious justification.
Another possibility is that Musk is looking for a way out.
It must be remembered that the stock of Tesla plummeted by 7%
when Musk announced his Twitter takeover. Perhaps Tesla's Board of Directors
was not pleased that Musk plans to finance his Twitter takeover by borrowing
against the value of his holdings in Tesla. Perhaps the Tesla Board thinks
that Musk would become a divisive figure that hurts the Tesla brand if he took
over Twitter. Maybe they pressured Musk to withdraw?
Musk experienced what it feels like to be in the eye of the
storm since his take-over announcement in April. For a month, some of the worst
epithets known were conferred upon Musk. Musk understands that as an
investor and a businessman getting along with people of all ideological and
political persuasions is essential.
Musk has seen how President Trump has been baselessly
subjected to legal scrutiny and government investigations for merely
challenging the status quo. The
Securities and Exchange Commission is already investigating
Musk over alleged tweets that could influence
Tesla’s share price without permission from a company lawyer. The
SEC is also
investigating Musk’s delayed disclosure of his large stake
in Twitter.
Perhaps someone in Washington privately warned or threatened
or advised Musk to stay away. Perhaps Musk himself wants to go back to focusing
on Tesla and his space programs instead of needless hassles? Or perhaps now that Twitter’s books are fully open to
inspection by Musk’s accountants and lawyers conducting his due diligence
investigation, he has uncovered data that raise questions about the accuracy of
the information provided to him and the public.
But a withdrawal wouldn't be without challenges. Twitter
could also sue Musk for breach of contract if he walks away
without. Musk and Twitter agreed to a ‘ termination fee’ of $1 billion when the
two sides reached a deal last month. But this fee won't allow
Musk to escape without consequence.
There have been some unlikely explanations too.
Some have attributed Musk’s sudden move to the launch of
President Trump’s Truth Social. Truth Social was founded to offer its users
total freedom of expression, it has consequently diminished the value of Twitter.
Truth Social is at the top of Apple
Store downloads.
Perhaps Musk expects the value of Twitter to plummet
further due to Truth Social and hence wants to withdraw? But Truth
Social was announced much before Musk’s Twitter bid. Perhaps Musk
underestimated the popularity of Truth Social? It seems most unlikely.
Some have called it a publicity stunt. It is unlikely that
Musk would indulge in P.R. which likely costs him $1 billion.
Whether Musk could walk away is probably a matter for the
courts to decide.
To be fair, fighting fake accounts and making its algorithms
open source has been a cornerstone of Musk’s Twitter bid. Maybe this isn’t a
delay tactic, but Musk is uncovering relevant data as
he and his representatives do their due diligence.
This question will be resolved in time.
Also appears on American Thinker
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