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Thursday, May 30, 2024

Elon Musk bought Twitter. What will be the effect of the deal

The sale of Twitter to Elon Musk took place on October 27, and on November 8, the company will leave the New York Stock Exchange, the SEC said. What does this mean for the social network and will the change of shareholder affect its relations with the Russian authorities – in the material of RBC

X Holdings II, Inc. – a structure owned by Elon Musk – acquired Twitter, Inc., which owns the social network of the same name, at a price of $54.2 per share. This is stated in the company’s materials filed with the US Securities and Exchange Commission (SEC). They note that the merger took place on 27 October. The New York Stock Exchange has notified the SEC that it has suspended trading in Twitter securities and intends to end their listing on November 8.

Elon Musk, serial entrepreneur, at TED2013: The Young, The Wise, The Undiscovered. Wednesday, February 27, 2013, Long Beach, CA. Photo: James Duncan Davidson

How Musk bought Twitter

Musk became one of Twitter’s largest shareholders in early April when he acquired a 9.2% stake in the company. In the middle of the same month, the businessman filed an offer with the SEC to acquire all of the company’s outstanding common stock. Initially, he was willing to pay $54.2 per share of Twitter, valuing the entire company at $44 billion.

After the deal, Twitter was to become a private company. “I invested in Twitter because I believe it has the potential to be a platform for spreading free speech around the world, which I believe is the foundation for democracy. However, after I invested [in the company], I realized that in its current form it would not serve this and prosper. Twitter needs to be turned into a private company,” Musk explained.

Technology and media

At that time, many experts were skeptical about Musk’s intentions, recalling the history of the Tesla buyout. Then the businessman in his tweet expressed his readiness to purchase the company’s shares for $420 apiece and make the company private again, but the deal did not take place. Because of this tweet, the SEC sued Musk, and as a result, he was banned from publishing stock price-sensitive information on Twitter without prior approval from an authorized representative of the commission.

In early May, Musk found investors willing to help finance the deal. From the SEC notice , it followed that he would receive more than $7 billion from the trust of billionaire Larry Ellison, the Sequoia Capital fund, Vy Capital investment firm, Binance crypto exchange, and others. But soon Musk announced in another tweet that the deal was suspended, asking Twitter to confirm media reports the number of fake accounts in the social network is less than 5%. The businessman himself was sure that there were at least 20% of them.

At the end of July, one of the shareholders of Twitter, through the court, demanded that the businessman complete the deal and pay compensation. Musk filed a counterclaim and won the case in August: the court ordered Twitter to provide the entrepreneur with additional information on spam and bot accounts.

In early October, Musk reinstated an offer to buy Twitter stock with its original terms. The other day , Bloomberg , citing sources , said that banks have completed the preparation of a financing agreement in the amount of $ 13 billion for the transaction. Then, over the course of several days, Musk “hinted” that the deal went through.

On Wednesday, October 26, he visited the Twitter office in San Francisco with a sink in his hands and posted a tweet “Let that sink in!” (the phrase is an idiomatic expression meaning “let it be realized” or “allow some thought”; literally translated as “put this shell inside”: this pun has become the basis of numerous English-language memes). Musk then pointed outon his Twitter profile, which is Chief Twit (can be translated as “chief tweeter” or “chief nerd”), and as the location – the headquarters of Twitter. On Friday morning Moscow time, he posted a tweet “Bird on the loose.”

In addition, Musk explained why he is acquiring the company: The reason, he said, is that “it is important for the future of civilization to have a common digital platform where a wide range of opinions can be discussed in a healthy manner, without resorting to cruelty.” According to the businessman, there is a big risk of social media splitting into “far-right and far-left ‘echo chambers’ that create more hatred and divide society. In pursuit of views, most mainstream media “fuels and encourages these extreme extremes” because they believe it’s profitable, but “the opportunity for dialogue is lost,” Musk said.

What will change ownership affect?

In itself, confirmation of the intention to close the deal should come as a relief to Twitter shareholders, who are concerned that the billionaire has repeatedly tried to find a way to back out of the deal, wrote The Financial Times.

At the same time, Musk has rather ambitious plans for the development of Twitter, The New York Times noted , citing a businessman’s presentation to investors. He intends by 2028 to:

  • increase Twitter’s revenue five times compared to 2021, to $26.4 billion;
  • reduce the share of advertising to 45% to reduce the dependence of the social network;
  • revenue from advertising will reach $12 billion, and from subscription – $10 billion, another $1.3 billion should bring a payment service, the development of which is now at an early stage;
  • the number of users should grow to 931 million from 237.8 million daily active users in the second quarter of this year (we are talking about those users that the company can monetize). The presentation also indicated that 104 million users would have some product marked with an X, but no details were given;
  • by 2025, the number of employees of the company should grow to 11.07 thousand from about 7.5 thousand at the moment. Earlier, The Washington Post wrote that in the event of the purchase of the social network, Musk could cut almost 75% of employees, but the businessman denied this information.

Former US President Donald Trump expressed the hope that after Musk became the main shareholder of Twitter, he would “like a good person” change the situation in the social network for the better, but he himself said that even if the deal goes through, he will remain in his own social network Truth, which launched after Twitter permanently suspended  his account in early 2021 due to the risk of “incitement to violence” during the Republican storming of the Capitol following the election victory of Democrat Joe Biden.

At that time, experts expressed concern that this blocking would become a precedent and entail the desire of various countries to more actively regulate companies in the Internet segment, “to think about the need for greater sovereignization of their Internet segment and technological platforms from American products.” This forecast turned out to be fair.

In May 2021, First Deputy Head of the Presidential Administration Sergei Kiriyenko explainedthe need to pass the so-called law on the landing of IT giants by the fact that American companies allowed themselves to disable the account of the current US president at that time. The law came into force on January 1 this year and obliges large IT companies to open legal entities or representative offices in Russia, comply with local laws and interact with the authorities; otherwise, these companies may be fined, the speed of access to their resources – slowed down or access completely blocked. At the end of January, Roskomnadzor stated that Twitter partially began to comply with the requirements of this law by registering a personal account on the department’s website, but then the requirement lost its relevance: after the start of a special military operation, many foreign companies, such as Google, tried to take out those employees who were stationed in Russia, to other countries.

Musk himself in May of this year called Twitter’s decision to block Trump’s account a “mistake”. “I guess it was a mistake, because it alienated a significant part of the population of the country and ultimately did not lead to the fact that Donald Trump did not have the right to vote. I would reverse the decision to permanently block, but Twitter does not belong to me yet, ”he said.

Musk’s statements about the situation in Ukraine caused a great resonance. In early October, he suggested in a tweet that Russia and Ukraine could make peace if Ukraine agreed to a series of conditions: re-hold a referendum in the occupied territories under UN supervision, recognize Crimea as part of Russia, resume water supplies to Crimea, and maintain neutrality. The words drew sharp criticism from Ukrainians and their supporters. At the same time, the press secretary of the President of Russia, Dmitry Peskov, called positive attempts to find ways to resolve the current situation by people like Elon Musk.

In turn, The Washington Post, citing sources , reported that Musk is increasingly feared by the US authorities because of his increased political influence and “reckless” statements.

The head of the State Duma Committee on Information Policy, Alexander Khinshtein, noted that Twitter was the first platform where he developed his blog, which he actively used for feedback with voters, but “over time, the general theme of the social network has changed a lot and has become a hotbed of hype on scandals and fakes “. “Today, Telegram has replaced Twitter. I think that the best years of the social network are over. But if the new owners manage to revive their former popularity, this will only diversify the landscape. The main thing is that the new administration complies with the requirements of Russian legislation,” Khinshtein said. He recalled that back in March 2021, Roskomnadzor began to slow down the speed of access to Twitter due to its refusal to comply with the requirements of Russian laws. To restore work in Russia, according to him, the platform must “remove all negative content,

His colleague, State Duma deputy Anton Gorelkin, clarified that the claims were caused by “a large number of fakes about a special military operation” posted on the platform, and its fundamental refusal to remove these materials. Previously, a number of Russian media accounts were “censored by the administration” of the social network or were disabled. “Elon Musk has repeatedly stated that he stands for freedom of opinion – now he has a great reason to confirm his words and remove all restrictions from Russian accounts,” Gorelkin said. “But I don’t think Musk would do that. Do not forget that the billionaire continues to finance access to satellite Internet for the Armed Forces of Ukraine and all his rhetoric about Crimea and Donbass is more like a hype than a sincere position.”

According to LiveInternet founder Herman Klimenko, Musk can stabilize things on Twitter. “The heads of social networks are often political figures. Musk is more of a businessman, and rationality is inherent in a businessman. This should play into the hands of the Russian authorities,” Klimenko said.

Investment strategist at Arikacapital Management Company Sergey Suverov is confident that if Musk buys the social network, investor interest may increase as he is able to revitalize the business. Investors will still keep an eye on the business, he claims, as Musk has pledged to list it again in a few years. “In general, this year has seen a decline in Russian investors’ interest in American assets. According to Suverov, the first reason is infrastructure risks, and the second is the decline of the American stock market.

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