Why Elon Musk Bought Twitter
The free-spirited poster child of the social network will pay $44 billion to take it private. Exactly what does he plan to do next?
On Monday, Elon Musk paid $44 billion for Twitter. Elon Musk, the CEO of Tesla and the richest person on the planet, seeks to take Twitter private and has stated that he wants the social media firm to conform more closely to the values of free speech.
Tweets are the “digital town square where topics crucial to humanity’s destiny are argued,” as he put it. Since Musk is a frequent tweeter, it’s safe to assume that he’ll keep using the service — and that includes reactivating the former president’s account. According to some reports, those who disagree with his policies will have a harder time getting banned from the network in the future.
I chatted with Matt Levine, a Bloomberg Opinion columnist who has been extensively researching and dissecting this topic in his newsletter, regarding the future of Tesla and its latest acquisition. I spoke with Tesla CEO Elon Musk on how he has used Twitter to advance his corporate interests, how he views freedom of speech and why Twitter’s influence is now greater than its financial value.
The purchase of Twitter by Elon Musk raises the question of why.
If that’s the case, then he’s upset that Twitter isn’t administered in accordance with his political and social ideals, which I presume is the case. I also believe that he enjoys and benefits greatly from tweeting, thus he would like it to be tailored to his needs. The fact that he is a bizarre public figure on Twitter adds to the value of his company, so it’s no surprise that he wants to claim ownership of his Twitter persona.
It isn’t immediately clear why Tesla is valued so highly. So, how much of Tesla’s value do you attribute to Elon Musk’s character and his public persona, particularly on Twitter?
Doesn’t Tesla create good high-end electric cars but is a little automobile company? On top of that, Tesla’s stock-market worth, which makes Elon Musk the wealthiest person in the world, is based on an abundance of confidence about the company’s capacity to produce more cars and take over as electric vehicles become more commonplace. On top of all that, he seems to be a visionary who believes in the future of transportation being provided via underground tunnels. To put it another way, he is launching rockets into space. These companies’ worth is mostly based on assumptions about how much money they’ll make, rather than on how much money they have really made. Expectations are bolstered by the fact that the company’s creator is a well-known, loud, and charming person who makes a lot of jokes online and who portrays himself as a science-fiction character.
Tesla is a costly business to manage. Instead of renting space on servers and writing programming, it’s more like a social network firm. To produce automobiles, large manufacturing facilities are required. As a result, Tesla has been able to sell millions of dollars of shares to new owners, circumventing Wall Street in certain ways, and selling stock to individual shareholders who are great admirers of Elon Musk rather than finding major institutions to sell stock through banks. Because of this public persona, his firm has been valued at a very high level since people enjoy it and trust him because he is an accessible figure to them in a way that a lot of other CEOs aren’t.
That doesn’t mean that owning Twitter will make that any more valuable, however. It doesn’t, at least not to me. In my opinion, it’s not clear to me how he would be better able to get his message out or tell a story in a way that is beneficial to Tesla and beneficial to his financial interests if he purchased Twitter. Even so, it isn’t a given that it will be. He’s also extremely intelligent. One alternative way to convey this tale is that Twitter doesn’t make as much money as Facebook and other social media businesses do. In terms of market capitalization, it’s a relatively small corporation. Look at how much value I gain from this direct access to the public,” he would say. Elon Musk and Tesla’s direct connection to the public has to be profitable in some manner, whether by increasing the value it provides for Tesla or by finding a method to monetize the value that it creates for athletes, celebrities, Donald Trump, and a slew of other individuals. Now, don’t you remember how much money Donald Trump’s comments back when he was on Twitter could make? And Twitter didn’t make a lot of money from that either. If you’re sitting on something that has the potential to create that much value, and you’re as brilliant as I am, you can probably figure out a way to get some value out of it.
The way that you mentioned him using Twitter for his professional image and business interests, does he stand out as unique, or is this a trend that you see more frequently now?
In the last five years or so, the development of meme stocks has been a great illustration of this: firms like AMC and GameStop have soared in the stock market thanks to social media, popularity, and game memes, and I think this is a good example of how people may mimic him. The CEO of AMC is Adam Aron, a Harvard Business School alum who’s worked in traditional corporate roles. Because his fans on Reddit and Twitter really enjoy it and it seems to be good for the stock, he’s really embraced the meme-stock nonsense. As well, he’s a little self-conscious about claiming that he’s now working for meme investors and that he’s doing everything he can to appeal to them.
You could only be in trouble on Twitter, and you had to write boring things that had been vetted by lawyers as a high-powered corporate person. In addition, I believe that Elon Musk’s firms are beginning to see the benefits of his rambunctious Twitter antics. In addition, I believe we’re in the early stages of the game and that there are likely to be a lot of copycats out there. More others will try to copy your style. Politics is no exception. As the obvious counterpart, people have discovered that being a political poster can earn you a lot of money.
You stated in a piece earlier this month, “Look, this is all clear, intuitive, easy sense. To be honest, if you’re a billionaire who enjoys and feels a strong connection to a computer game and is also annoying to be around, you might have some ideas for how to make it better someday. It’s a narrative of his desire to acquire Twitter from a more personal perspective if that makes sense. There is also the more financial, or commercial, account that you have just described. But at the same time, it almost seems difficult to separate the two things, unless you believe that all of his conduct is some elaborate show or something.
That’s what I believe. It’s possible that he sees them as separate entities, in which case I may be mistaken about one of them. But who or what is Tesla, exactly? In my opinion, he truly believes that electric automobiles and the elimination of the internal combustion engine are good for the globe. In addition, I believe that he takes great pleasure in amassing enormous wealth from his Tesla investment.
He’s a greedy scrounger.
Even if I’m wrong, it’s possible. As far as I can tell, he doesn’t spend a lot of money on things that most people do. He’s a mystery to me, and I don’t know why. In my opinion, Tesla isn’t either a for-profit company or a non-profit company; it’s something in between. Like most of his businesses, I believe he’s driven by a desire to succeed and to feel like he’s contributing to the greater good, which is evident in his love of solving problems and his desire to amass wealth and fame. Twitter, in my opinion, satisfies all of those criteria as well.
Can we glean anything about his Twitter plans from his S.E.C. filings or other public statements?
Nothing occurs to me. TED was where he spoke about it. Aside from wanting more freedom of speech, he also stated that he wished for permanent bans to be lifted and that advertising should be reduced in order to protect free speech, all of which are valid points. Unmoderated Twitter, in my opinion, will drive away advertisers. If you don’t care about advertisers, then you can have a more unmoderated Twitter. Things like that, you know, like that. Musk just tweeted that he wants his worst critics to remain on Twitter because that’s what free speech means. I think a lot of people are worried that he’s going to ban his critics.
From a corporate finance perspective, the idea is that you buy Twitter and then it’ll be a private company and he’ll just control it. So he doesn’t need to present a business plan to, for instance, the board of directors of Twitter or the shareholders of Twitter. It’s possible for him to just say, “You take the money and leave, and then it’s my firm.” His words had some impact. They aren’t a part of his contract. Ownership of the corporation means he has complete control and can do whatever he wants with it.
But he also has money coming in from outside sources, including banks and equity partners. It’s possible he has a business strategy for this, claiming “This is how I’m going to earn money using Twitter,” and so on. Subscriptions have been mentioned by him.
His views on free speech appear to be in line with a more right-wing or conservative approach to speech concerns, which says that social media corporations should not be banning people for things that are regarded as inappropriate or hate speech or what have you. ‘ No, he’s expressing something more interesting than what you’re reading into his views on free speech.
Nothing noteworthy has come to light recently. In my opinion, he has a history of being a troll and a bully on Twitter. For all I know, he may have a different idea of what constitutes proper conduct on Twitter than most people do. When it comes to Twitter’s current management, he would change things up a bit. I’m not sure what he’s up to, but it’s possible. He’s looking for a little less restraint and a little more freedom.
In general, this appears to be a problem for tech firms, but how does it express itself in a multinational firm? Twitter is widely used in countries where free speech is less protected than it is in the United States, and governments frequently ask social media companies to take action against content they find offensive. Does he vary in any way from Twitter’s approach to dealing with these problems?
I’m sure everyone has had a difficult time dealing with these challenges. In spite of the fact that Elon Musk must conduct business across national borders, my first impression is that his understanding of the phrase “free speech” is entirely American. When the Chinese government wants the direct communications of dissidents in exchange for approving a factory for Tesla, he will face pressures on him that are distinct from the pressures on a car company—pressures that are about speech, politics, and user information. Because of these pressures, I don’t know whether he has any better solutions than the bleak history of publicly-traded social media firms.
The Securities and Exchange Commission (SEC) has previously had several run-ins with Tesla CEO Elon Musk. I’m curious to learn more about how he views the SEC in general. With this purchase of Twitter, do you think the government will get involved?
As he has stated publicly, his approach to the SEC is that he does not respect the SEC. He’s referred to them as scumbags. When he tweets, the S.E.C. checks it with a fine-toothed comb to see whether he’s saying things that aren’t true, and it’s a bizarre series of encounters. Everything started when he announced in 2018 that he was considering taking Tesla private and had the funds in place. He was shown to be right. In the end, he didn’t do anything. He claims to have done so now, but the fact remains that he did not. Also, the S.E.C. found that to be deceptive, and they were correct. As a result, he was sued. They were able to come to an agreement on a pretty low sum of money. Compared to him, the sum was a drop in the bucket. As a result, [Musk] was forced to resign as chairman of the board.
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