Assume that you have been frequenting a sushi place for a few years. You do not like the management, the service, and so on. Nonetheless, you continue visiting for the sake of sushi. However, one day you wake up so exasperated and wealthy that you decide to purchase the place. Twitter is that place, and you are the world’s richest person. Elon Musk, the CEO of Tesla and Space X, purchased Twitter in one of the most controversial acquisitions of the U.S.
Of course, there is now an asterisk attached to that statement: the deal is on hold, and Twitter’s shares have plunged in response. But for argument’s sake, let’s assume that Musk will ultimately follow through on his initial goal.
How did this come to be? With a tweet and a poll.
In March, Elon Musk asked his 82 million followers about Twitter’s functionalities in a poll. According to 70% of the respondents, the platform does not adhere to the principles of free speech. Musk had started buying Twitter shares in January. Following the poll, Musk amassed a 9.2% share of the company, worth $2.9 billion. He had now become the largest stakeholder in the company.
Elon Musk is not only one of Twitter’s most prolific users but also its biggest critic.
He has been questioning Twitter’s policies and its management’s activities for some time now. The fact that he purchased a bulk of the company’s shares hinted that he intended to make reforms to the company. However, a 9.2% stake gave Musk neither a controlling authority nor a seat on the Board of Directors.
Twitter CEO Parag Agarwal wanted to evade an impending power struggle between the billionaire and the Twitter management. Hence, he offered Musk a seat on the board, given that Musk will not expand his stake by more than 14.9%. It would give Musk a voice at the company and safeguard the management’s interests. Elon initially accepted the offer. However, a few days later, he backed off and made a prodigious offer of $43 billion to purchase Twitter.
The top management at Twitter wanted to thwart this transaction. They pulled off tricks from the books. They even adopted the ‘Poison Pill’ strategy. If Musk acquired a 15% share of the company, other shareholders could buy shares at a discount rate. This tactic would flood more shares in the market, and Musk would have to chase them. However, Elon Musk was too motivated to back down. His final offer to the company was a lump sum of $44 billion. It made the price of each share $54.20, which was 38% over the share price on April 1st. After a fit of tantrums, the management conceded.
This transition of power brings us to a burning question: What happens to Twitter now?
Elon Musk has been vocal about making some changes in the company. He has proclaimed that he sees Twitter not as a financial investment but as a service to people.
He called the social media platform the ‘Digital Town Square’, where advocates of democracy can exchange their views without any restraints. According to him, the current management had curbed the platform’s potential. Musk would like to harness Twitter’s ability to ensure free speech for all.
Musk’s takeover means that there will be an amelioration of content rules. For years the platform has been criticized for its censorship. Many conservatives were infuriated with Twitter’s policies and stopped using it. Following Musk’s acquisition, conservative Twitter accounts have had a boost in followers. Conservatives favor fewer controls. However, this change may also give rise to hate speech. The platform played crucial roles in the Arab Spring Uprising, the Storming of the U.S. Capitol, and many more. It could also mean that Elon will reinstate the accounts of banned individuals like former U.S. President Donald Trump. Although Trump has proclaimed to never return to Twitter now that he has ‘Truth Social,’ many activists do not support the idea of reinstatement. Human rights activists fear that less moderation over content may incite violence in marginalized communities.
In addition, Elon plans to get rid of adverts. He believes that advertisers greatly influence company policies because of the revenues adverts generate.
However, 90% of Twitter’s current income comes from adverts. How Elon Musk plans to provide a substitute for advertisements is beyond anyone’s grasp. He does intend to charge users a paltry subscription fee. But it will not be enough to compensate for the income that comes from advertisements.
Spambots have been the cause of misinformation and scams on Twitter. Elon Musk targets to beat these bots by improving Twitter’s authentication system. Moreover, he will introduce an ‘Edit’ button, one of the most anticipated features of Twitter. Some contend that an edit button will have the platform to lose its transparency. Assume that a person tweets, “Minorities do not deserve hate speech.” You like it and retweet it only to find hours later that the tweet is now “Minorities do deserve hate speech.” Your likes and retweets are still there but with new implications. The company intends to administer this feature to correct typos and other minor faults in a tweet. According to Musk, the edit button will have a time restriction and would zero out any retweets. Would it be enough to curb the spread of misinformation? There is no certainty.
Finally, Musk intends to make Twitter’s algorithm public.
He is willing to post the social medial platform’s code on Github and draw out suggestions from people to improve the algorithm. However, anyone in bad faith will have something to say about it. Moreover, people may abuse it. It seems that Elon Musk’s intentions are noble, not pragmatic. The CEO of two monolithic corporations may have bitten off more than he can chew.
There is another question that begs our attention. Why was the top management of Twitter reluctant to sell in the first place? The board of directors of a public company has a fiduciary responsibility. They must act in the best interest of the shareholders. Musk’s initial offer would have benefitted the stakeholders. Yet, the management tried tactics to balk at the transaction. It could not have been because the board believed that the company’s valuation could surpass Musk’s offer in the future. It is because for years has been going nowhere financially. Twitter remains with around 400 million users, whereas Facebook and other social media sites have over a billion users.
So what was their defense? Twitter management would not profit from this transaction. Elon Musk had explicitly expressed his dissatisfaction with Twitter’s management team. It was evident that if he came to power, the board would no longer stay. Even if the management members were to lose their jobs, they should be able to make profits from their shares. Unfortunately, none of them own a significant stake in the company. The combined stake of the board is around 2.94%. The board members owned low shares that made them immune to their own decision. In the investing world, this phenomenon is a red flag.
Another possibility is that the board did not want to relinquish control over the company. Twitter and companies like it have much to hide. They are censors but claim that they are not, and they advocate free speech but prevent conservatives from practicing their rights. Musk could open the company’s books and make all the information public. All of Twitter’s dark arts will be on display. It would lead to people knowing about Twitter’s activities in recent years. He said that he would make the algorithm public. People will come to know that Twitter gives minimal freedom to people over their content. In a nutshell, the management was trying to save its skin. Then why did it sell? It was probably to evade a potential lawsuit from shareholders. The shareholders own the company, and they decide to sell or not.
Kanye West once tweeted, “No one man should have all that power.” He had also tweeted “Poopy-di scoop Scoop-diddy-whoop,” but that’s not the point.
Although an eccentric man, Ye might be right. Twitter management’s failures and questionable activities may justify Elon Musk’s acquisition. However, it may not justify the power Musk possesses now. Previously, the company was answerable to shareholders and the SEC. Now, it’s just one man at the helm of Twitter. Elon Musk is a genius. But he is not infallible. Twitter is a place where people fight cultural and political wars. It is a place where opinions transform into ideologies. Should a platform like Twitter be subjected to the whims of a single person? The company may progress financially. However, the concern is not about money but public welfare.
The Twitter saga couldn’t be more ironic. A free speech absolutist is probably going to be the owner of an influential platform like Twitter. Yet, conservatives are rejoicing and liberals are mourning.