Weekly Brief: Techno King and the Blue Bird: Elon Musk proposes to buy out Twitter
- Waseda Economics and Finance Forum
- May 26, 2022
- 3 min read
Background
On the 13th of April, Elon Musk, the CEO, or the “techno king” of Tesla and SpaceX, offered to buy out all the shares of Twitter at $54.20 per share. This was after Musk became the biggest shareholder of the social media platform used by roughly 200 million people around the world. There are ongoing conversations on his intentions and the impacts of this acquisition.
Elon Musk and Twitter
Before moving on to the intention and impacts, there should be an explanation of the relationship between Musk and Twitter. Twitter has been the social media platform that many prominent figures such as former US President Donald Trump use to express their opinions. As for Elon Musk, his Twitter posts were known to be widely influential on the market price of cryptocurrencies and stocks. One famous example would be his stance on the alternative cryptocurrency, “the dogecoin”.
With Musk constantly showing his interest on the alternative cryptocurrency, which was considered to be a joke based on the famous internet meme with Shiba Inu, the price of dogecoin skyrocketed.
(The rise of Dogecoin- Pandey (2021) of DM.com)
As such, the influence of Musk’s Twitter posts on the financial market has been controversial to this day.
Why does Musk want to buy Twitter?
After understanding the relationship between Musk and Twitter, we can all agree on the importance of public disclosure on the investor’s sentiment as well as on the company. Freely being about to share narratives on the business, market, and even policies exert matters to significant figures like Musk. Musk has been concerned over the limits and moderations on the contents of tweets by the company, seeing it as the lack of right to free speech. In his letter to Twitter on 14th of April, he delivered his initial reason for investing in Twitter “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,”(Isidore and Thompson, 2022). In the same letter, he expresses why he intends to buy out Twitter “However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company." (Isidore and Thompson, 2022). From the role that Twitter played in disclosing Musk’s idea and his words to Twitter, one can interpret his intention to transform Twitter into a platform where Musk can open his stance on just about anything freely to impact the future of his company, the market, and the economy.
(From Elon Musk’s Twitter Account @elonmusk- Twitter)
What is going on for now and what might be the possible impact?
Musk offered to buy out all the remaining stocks of Twitter with a statement that he will dump the shares he owns if the company rejects the proposal. For now, Twitter has announced to review of the proposal to “determine the course of action that it believes is in the best interest of the Company and all Twitter stockholders.”(Lerman,2022). In considering the impact on the operation of Twitter, Musk previously mentioned his intention to join the board and later immediately declined to do so. This means, for now, it is uncertain whether Twitter’s algorithm for moderating the tweets will be transparent to the public and change the major course of the operation even if he fully acquires Twitter. On the side of stock prices, the stock price of Tesla declined about 3.66% and the stock price of Twitter declined 1.68% on the day of the proposal. Such changes in the price depicted the doubts by the investors on whether the proposal will be accepted or not and as well as the view that such a radical move by Musk can be seen as a risk factor. The decision by Twitter has not been decided yet at the time of writing this brief. So people may need to pay close attention to the progress of the techno king and his bluebird.
References
Fung, B. (2022, April 14). Elon Musk says his offer to buy Twitter is about 'the future of civilization,' not making money. CNN. Retrieved April 16, 2022, from https://edition.cnn.com/2022/04/14/tech/musk-twitter-offer-explanation/index.html
Isidore, C., & Thompson, M. (2022, April 14). Elon Musk offers to buy Twitter. CNN. Retrieved April 16, 2022, from https://edition.cnn.com/2022/04/14/tech/elon-musk-twitter-offer/index.html
Pandey, A. (2021, May 11). Dogecoin: The world's most valuable joke. DW.COM. Retrieved April 16, 2022, from https://www.dw.com/en/is-dogecoin-the-next-bitcoin/a-57493970
Lerman, R. (2022, April 14). What is going on with Elon Musk and Twitter? The Washington Post. Retrieved April 16, 2022, from https://www.washingtonpost.com/technology/2022/04/14/elon-musk-twitter/
+) Elon Musk’s Twitter.
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