MarketWatch First Take: Twitter stood up to Elon Musk and won, but will it feel like a win once he owns it?
Elon Musk is the world’s richest man because he tends to win staredowns with opponents.
In the curious case of his offer for Twitter Inc. TWTR,
“The easy part for Musk is buying it,” said Dan Ives, an analyst at Wedbush Securities. “The hard part is going to be fixing it.”
Musk, the chief executive of Tesla Inc. TSLA,
Musk initially made a hostile offer for Twitter, after buying up 9% of its shares, that was ultimately accepted by the company in late April. Then he tried to back out, saying in May that the deal was on hold while he waited for data about the number of spam bots on the platform. As this column had previously made clear, the bot problem was a facade: Twitter had always warned about bots on the platform and Musk even said when the deal was announced that he planned to fix the situation.
The decision by Musk to drop his ridiculous posturing means that he could now own Twitter within a week — Ives predicted in an interview with MarketWatch that the deal would be complete in seven to 10 days. While Twitter employees who own stock are going to celebrate getting paid a healthy premium for their shares, the rest of their future is hazy right now.
Twitter employees have already had a taste of what dealing with Musk is going to be like. In April, several employees spoke to MarketWatch’s Jon Swartz after Musk’s initial hostile bid for the company, and their comments were scathing. In a June live-streamed meeting with Musk and employees, they got an up-close, albeit virtual, view, of what the billionaire is like — he inferred he would cut jobs, said he is not a fan of remote work, and praised the Chinese platforms TikTok and WeChat because they’re “not boring.”
Put it together, and it seems like a lot of change is in order at the San Francisco company.
“I believe it’s going to be a tidal wave of employees that leave Twitter,” Ives said. “The Musk DNA and the Twitter DNA, that’s like putting mustard on a slice of pizza. Just culturally, there are going to be more questions than answers.”
Musk already runs multiple companies, in addition to Tesla, including SpaceX and The Boring Co. With his highly publicized Twitter spats — such as comments this week that sparked outrage in Ukraine — and his penchant for lies, exaggeration and overstatements, Musk is the antithesis of the ideal leader for Twitter, the water-cooler meeting place of Silicon Valley.
Josh White, an assistant professor of finance at Vanderbilt University, believes Musk, who “has a reputation for dedicating his time, like the stories of sleeping on the floor of Tesla’s factory until he can get things right,” will have even more motivation in this setting to turn what appears to be a very public legal defeat into a financial win.
“Elon will take the company private initially because of the structure of his financing,” he said. “That said, I expect him to be singularly focused on showing that he can create value out of Twitter and eventually take it back public.”
That won’t be easy. Musk was attempting to get out of the deal because it was an obvious overpay, especially after tech stocks were slammed in the first half of 2022, with the biggest Wall Street hammer aimed at social-media companies as online advertising cratered. And his statements so far seem to be aimed at unrealistic targets.
He told Twitter employees in the all-hands meeting that one measure of success would be to increase Twitter’s daily active users to “at least” 1 billion in five to 10 years. In the most recent second quarter, Twitter, which now reports only on monetizeable daily active users, said it had on average 237.8 million monetizeable daily active users.
There is truly no way to create that growth without welcoming as many bad actors, bots and other unsavory users to the platform, and even doing that would likely chase away many power users who make the platform what it is today. With the Supreme Court set to review the first-ever cases involving Section 230 of the Communications Decency Act, amid the outrage of the far right proclaiming that left-leaning content gets precedence in social media, Twitter’s acquisition by Musk could stir up an even bigger conflagration.
“It’s a political firestorm on both sides of the aisle,” Ives said. “There are unintended consequences. It’s one thing to be a user, it’s another thing to be the owner.”
“Controversy finds Musk almost on a daily basis,” the analyst said. “There are more questions than answers.”
Twitter answered the biggest question by staring down Musk and winning: He will now own the platform. As for what happens next, there is no way to tell, with the unpredictable Musk set to take the helm.