On October 27 of this year, American entrepreneur Elon Musk officially acquired Twitter.
This deal itself is quite unique. It is important to emphasize some interesting points here - for example, just a week before the famous Twitter news, Elon Musk said that he was not going to make such a purchase. He argued that running a company can be problematic and generates more waste than benefits. However, after detailed talking to other entrepreneurs like Jack Dorsey, Peter Thiel, directly the founder and owner of Twitter, the developer of PalPay and a colleague of Musk, as well as David Sachs, who rose on venture capital investments, he radically changed his mind. It is also interesting that the American entrepreneur, within a short amount of time, found funds to acquire Twitter. What could have influenced the engineering genius of the XNUMXst century?
Let's try to understand this issue in more detail.
How Elon Musk wanted to buy Twitter and then changed his mind
Information that Elon Musk wants to acquire Twitter began to seep into social networks and the media since the beginning of this spring. In the summer of 2022, the entrepreneur firmly stated that he was not going to buy the platform, since many reasons contribute to this - in particular, management features that do not allow finding out bot data, the total number of which is about 5% of the total number of users. Ultimately, this led Twitter to initiate legal action against Musk to force him to invest in the company or buy it outright.
court on preliminary meeting on October 7 delivered a verdict, according to which, by the end of the month, Elon Musk must forcibly acquire the Twitter platform, otherwise the case will be transferred to higher authorities, because of which the case may take a more serious turn. An alternative was also proposed - an American businessman should make peace with the company's management and pay the appropriate penalty.
Throughout October, as such, no news of progress in this story was published. Only On October 26, information was leaked to the media that Elon Musk visited the main office of Twitter in San Francisco. - on his page, he set exactly this location, and then called himself "the main tweet" - "chief twitt". At this time, the transfer of funds from the bank accounts to the account of Musk himself began - according to preliminary estimates, this amount was equal to $ 13 billion in targeted funding.
Did Elon Musk really want to buy Twitter?
- How was the deal with Twitter funded?
The total amount of the transaction is 46,5 billion dollars.
Considering all the tweets Musk has posted over the past few months, there is a clear sense that he was unsure of his own choice. Apparently, he constantly weighed all the pros and cons, as evidenced by the following facts:
- On April 4, Elon Musk announced on his Twitter page that he had become the largest investor in the company;
- On April 5, an American businessman received an invitation to visit the board of directors;
- On April 11, the billionaire officially refused the offer of Twitter management;
- already on April 15, Elon Musk himself took the initiative and offered to buy back the company's shares at $54 apiece (at the same time, he wished to buy all the shares in full, i.e., in fact, buy out the entire Twitter);
- On May 13, Elon Musk stated in his account that the process of acquiring Twitter is at the stage of freezing, since the situation with bots is still being resolved (which is why the entrepreneur initially postponed the idea of buying the platform);
- after a long time, on October 5, the billionaire engineer posts in his account that he still intends to become the head of Twitter, but only with the aim of further reprogramming into a multifunctional application.
It is noteworthy that just a day before the last mentioned event, Elon Musk's lawyer told Twitter lawyers that the entrepreneur wants to back out of the deal.
As can be seen from the calculations by the Wall Street Journal, various people and organizations provided funds for the purchase of Musk's company on credit, such as:
- Larry Ellison, Oracle co-founder, influencer and billionaire;
- CEO of Binance, Changpeng Zhao
- prince of Saudi Arabia;
- set of investment funds listed above.
However, such gestures indicate the financial and moral support of Elon Musk from other entrepreneurs.
Did the purchase of Twitter justify itself?
Before understanding how the acquisition of Twitter was appropriate, a few facts need to be cited:
- share price - 54,2 dollars;
- the price-revenue ratio is 8,24;
- price-earnings ratio - 236;
- Twitter's main source of income is a one-time non-core focus.
From this we can conclude that from an economic point of view, the purchase of the company was not profitable for Musk.
At present, the American entrepreneur believes that while losses are inevitable, the company will prove to be especially valuable in the potential future.
Twitter pays off $51 billion a year in debt, but the revamped Twitter will only pay off $13 billion in debt, at $1 billion a year.
According to 2021 statistics, net income was seven hundred million dollars, which is significantly less than the total amount of debts.
What is the fate of Twitter
After buying the company, our showman's first decision was to rotate staff - he cut the executive director of Twitter, head of accounting and several leading developers and specialists from the legal department. With such actions, the American entrepreneur wanted to show that the structure and direction of Twitter will change radically. Accordingly, a different business model of the platform will be introduced, so in the foreseeable future, users will be able to see significant changes in the principle of its operation. Given the fact that the company has huge debts, in the near future Elon Musk may lay off even more employees and replace those people who, in his opinion, will better cope with current tasks. It is also quite realistic to abolish some positions and create new ones if the business model changes dramatically in the key chosen by Musk.
The company currently employs about 7,5 thousand people, while the billionaire plans to lay off about 3,7 thousand, since, according to his calculations, Twitter is spent on maintaining some services at $ 4 million a day.
Now, many Twitter employees have either received official letters notifying them of their removal from their posts, or employees have been disconnected from internal systems without prior notice. However, later they received reports that this was a mistake, as well as requests to return to their duties.
At present, we can only guess how many employees of the company will be fired, but it will not be possible to assess the scale of Elon Musk's actions earlier than in a month.
The new owner of Twitter himself said that he wants to reduce advertising costs by up to 45% (previously it was 80%), as well as introduce subscriptions on a paid basis and related payment services. According to his idea, Twitter by the beginning of 2028 should increase its profitability by 4 times, that is, up to $ 24,5 billion, and the number of users - up to 931 million.
Musk has already introduced the use of a blue checkmark next to a person's nickname and introduced a paid subscription for using this feature. On the other hand, there are still conflicting comments regarding this functionality, since in fact no verification takes place and a lot of fake news has appeared on the network from allegedly verified profiles of Coca Cola and other companies and agencies.
The verification checkbox is only available with a $7,99 subscription.
In addition, Elon Musk does not want to leave Twitter at the same level and wants to turn it into a multifunctional application in which you can not only correspond with other users, but also order a taxi, food, or use built-in functions that neutralize the need to use any third-party services.
Musk has also already restored access to Donald Trump's account, although he is not in a hurry to start using it, apparently the old grievances have not yet passed :).
What do you end up thinking on Twitter?
I think that Musk has taken the right course and has already made a serious restructuring. Like much that Elon Musk did, at first everyone laughed or made fun of his actions, and then they become users of his services / products. I believe that in the future we will see the return of the updated Twitter to the exchange. It will be necessary for Musk to somehow return his spent money :).
What do you think?