In a new twist to the tale of Twitter’s acquisition by Tesla CEO Elon Musk, the world’s richest man announced on Monday that he would, after all, close the deal at the $54.20-a-share price agreed in the spring. After having his official bid for the micro-blogging social media platform accepted in April, Musk formally attempted to back out of the deal, citing doubts over the validity of Twitter’s claimed active real user numbers.

However, on Monday evening he said he said he would in fact go ahead with the acquisition at the agreed price. The deal is not done yet, as emphasised by the fact the Twitter share price yesterday closed at $49.39 after a near 4% drop from Wednesday’s optimistic-looking $52.02.

A significant amount of mistrust has built up between both parties and yesterday lawyers acting on behalf of Musk were criticising Twitter’s failure to withdraw litigation and cancel a trial scheduled to take place in Delaware in November. A tit-for-tat legal exchange yesterday saw Musk’s lawyers submit a filing that exclaimed “Twitter will not take yes for an answer”, quickly countered by Twitter’s lawyers who responded the request to pull the trial before a deal is closed was an “invitation to further mischief and delay”.

A Delaware judge has, however, given Musk a new deadline of 5pm October 28 by which to complete the deal and it looks more like than not that he will be the new majority owner of Twitter by Halloween.

While nothing can be guaranteed when it comes to predicting Elon Musk’s next move, it does look very much like he has accepted legal advice he cannot extract himself from the deal without paying much more than the reportedly agreed $1 billion “break” payment. That clause would only come into effect under certain conditions and legal experts have cast serious doubts on the likelihood of Musk convincing a Delaware judge he was misled by Twitter over active user numbers.

It is far more likely he would be told he signed a contract and his complaints can be put down to a lack of due diligence on his part. If he wanted to dispute Twitter’s methodology for counting active real user numbers, which was clearly stated leaves room for error, he should have done so before signing.

If he did pull out he would be expected to lose the lawsuit that would inevitably be brought against him by Twitter and face a fine of several billion dollars. As such, the market is betting on him having concluded he has to make the most of the ownership of Twitter, since he can’t get out of it without accepting great personal financial cost.

But one thing’s for certain, Twitter under Musk’s ownership will be focused on making more money. Monetisation and revenue growth has been the perennial problem for the social media platform, which has always been far higher profile and more socially and politically influential than it has been profitable.

Musk will be determined to change that and hasn’t been reticent in expressing his ideas on how to go about it. The question is if the serial entrepreneur who made his billionaire breakthrough when his early online bank X.com merged with Paypal, will succeed where Twitter founder Jack Dorsey and successive independent boards have failed.

It’s hard to argue Musk’s track record in growing businesses is not impressive. After leaving Paypal, he went on to co-found Tesla, the world’s most valuable car company, as an early majority investor, Space X the satellites and space exploration company and several other enterprises. But the world’s richest man and arguably its most successful serial entrepreneur has no experience in social media, other than as a prolific and often controversial Twitter user with 107.8 million followers.

Will his golden touch work again or is the Twitter acquisition an impulse buy vanity project that spiralled out of his control?

Will the Twitter share price soar under Musk’s ownership?

The big questions are what might Musk do in an attempt to improve Twitter and attract more and more engaged users and generate higher revenues in roughly its present format. Musk himself has made numerous statements since the spring which offer plenty of early insight into what investors, users and other Twitter stakeholders might expect.

Number of monetizable daily active Twitter users (mDAU) worldwide from 1st quarter 2017 to 2nd quarter 2022 (in millions)

Source: Statista

In June, Musk told Twitter employees he wants to increase user number from the then level of 217 million (20% of which Musk believes to be bots to Twitter’s 5% estimate) to 931 million by 2028. He also wants revenues to hit $26.4 billion by 2028 from $5 billion last year.

If he achieves that, or anywhere close to it, Twitter will be worth many times more than it currently is. There are numerous clues to how he plans to or might go about achieving those targets in his recent utterances and texts and other communications that have been revealed in court.

Management and workforce

If Musk’s acquisition does indeed go ahead before the October 28 deadline set this week by a judge, it can be presumed Twitter’s current CEO Parag Agrawal will be looking for a new job by November. It’s fair to say the evidence suggests the pair do not get on.

Text messages between the two shown in court start professionally but descend into acrimony with Musk at one stage pointedly asking the Twitter CEO “What did you get done this week”.

A phone call between them arranged by Twitter founder and former CEO Jack Dorsey was followed by him stating “It became clear that you can’t work together”.

It seems inevitable that Musk will get rid of Agrawal as soon as he takes over ownership of the company but doing so will come at a price. The CEO’s contract means he will bank $42 million if sacked.

Some analysts and commentators also think there is a risk of a mass exodus of Twitter’s workforce, which is believed to be largely liberal. Musk is, by contrast, renowned for his right-wing views and has a reputation as a hard taskmaster. He has also demanded employees at his other companies return to the office in the aftermath of the Covid-19 pandemic, while Twitter currently operates a remote work policy.

However, while replacing large numbers of key employees will be a challenge, Musk might well see a self-purge by the company’s staff that don’t align with his views and way of working as a short, sharp pain that is better to get out of the way early and quickly. Even if it leads to disruption.

In text messages exchanged with his friend, the investor Jason Calacanis, Musk stated that there was “insane potential for improvement” in employee productivity when the former pointed out that revenue per Twitter staffer was $625,000 compared with Apple’s $2.37 million and Google’s $1.9 million.

Musk will demand more of the company’s employees but also wants to increase numbers at Twitter from the current 7500 to over 11,000. There may be a major changing of the guard but he has enough of a cult of personality that as many talented engineers who are put off by him may well be keen to work for him and under the conditions he demands of them.

Free speech

Musk is a self-confessed extremist on the topic of free speech and believes in a complete lack of censorship. He’s already promised to lift the ban on the former U.S. president Donald Trump, describing it as “flat-out stupid”.

Even if Trump, who has said he wants to remain loyal to Truth Social, the conservative site he founded, doesn’t return to Twitter, other controversial figures who have been banned might. Musk has said he favours suspensions to bans but has also commented on the vision of Twitter as entirely censorship-free.

That would roll back years of attempts by Twitter to moderate and censor content in an effort to clean up its early reputation as a playground for hate and harassment. How returning Twitter to its libertarian roots will work out is anyone’s guess.

Bots

But Musk seems convinced that his plan to clean up bot-controlled Twitter accounts will also lead to better self-moderation by users. He is convinced 20% of the platform’s user accounts are fake or bots and his proposed solution to ridding the platform of them is for every user to have to confirm their identity, removing anonymity. Whatever any user posts on Twitter will be traceable back to an individual.

However, by doing so, Musk could wipe tens of millions of accounts from the platform which would be expected to hurt its valuation in the short term at least. How much of a better user experience a botless Twitter would be is debatable. There are also many bot accounts Twitter considers “good”.

These scripts pick up and share content on particular themes and hashtags and Twitter says it is very difficult to automate a way to differentiate between good and bad bots. If Musk wants no bots on the platform of the kind considered “bad” he may have to accept no bots at all.

Monetisation

Over the years, Musk has regularly criticised Twitter’s ability to generate revenue as successfully as other social media. Founder Dorsey and previous boards have argued its intrinsic nature as a microblogging platform has meant there is simply less opportunity to monetise users but not every analyst and commentator, including Musk, has always been fully convinced more can’t be done.

Musk has several times floated the concept of a subscription model for premium Twitter accounts which offer greater visibility, social credit and other advantages. Simply having many times more users would also be expected to make Twitter much more profitable.

But it is here that the longer-term question arises. How might Musk change and evolve Twitter to make more money?

X – the everything app

Musk’s long-term plans for Twitter are, like his short-term vision for improvements, not a secret. At least, he has made public statements around his ambitions for an “everything app” he calls X, like his first business, the online bank X.com, which he has stated in the past he originally had a grander vision for than just banking.

He appears to retain those ambitions, tweeting earlier this week

“buying Twitter is an accelerant to creating X, the everything app.”

He has also namechecked Tencent’s WeChat app on several occasions and it seems very much like he plans to use Twitter as the starting point to building out X. In June he told Twitter employees

“there is no equivalent of WeChat outside of China. There’s a real opportunity to create that.”

And in an August meeting he mused of X:

“Obviously that could be started from scratch, but I think Twitter would help accelerate that by three-to-five years. So it’s kind of something that I thought would be quite useful for a long time. I know what to do.”

WeChat has 1.3 billion users in China and Chinese-speaking communities in other, mainly South-East Asian, countries but also among expats and ethnic Chinese who are citizens of other countries, including the USA. It started as a pure chat app but is now an all-in-one platform that allows users to also do things like send payments, book taxis, read news and watch entertainment. It does so much by enabling third-party developers to create “mini apps” that attach to the main service.

It’s a sprawling tech ecosystem wrapped up in an app that last year generated $17.4 billion, 19% of parent company Tencent’s total revenue. The Hong Kong-listed Chinese tech giant is worth $342.59.

Even China’s state pandemic-tracking system works through WeChat: it notes what health code a user is, which determines where they can go and whether they can take public transportation and enter public venues. Businesses use WeChat too with its trading economy worth roughly $240 billion.

That Musk would like to turn Twitter into something akin to WeChat for the West seems in little doubt. If he will succeed in doing so in another question.

How and why might Twitter become Elon Musk’s corporate ‘nam?

Musk has a history of delivering big on his grand visions, even after years of being written off. But like almost any serial entrepreneur, he has also had failures in his business life. His big statements on the future of HyperLoop transportation technology, which inspired him to found The Boring Company, now look unlikely to come to much. While there is still time for him to be proved wrong, it’s looking increasingly like we’ll be sticking to good old metro and other forms of more tradition rail-based transport for the foreseeable future.

His plans to break Twitter free of its censorship and content moderation shackles and rebrand it as the social media for free speech could, believe some, go horribly wrong. Angelo Carusone, president of Media Matters for America, has commented

“Musk will turn Twitter into a fever swamp of dangerous conspiracy theories, partisan chicanery, and operationalised harassment.”

If that dystopian scenario comes to pass, it would be expected to be a big turn-off for advertisers that even an explosion in active, verifiably real user numbers might not compensate for. A Twitter that is not seeing quick, sustainable revenue growth might quickly lose its allure for Musk. Making Twitter a platform for free speech without it descending into toxic anarchy is also a different kind of problem from those he is used to solving. In the past, he has always looked for an engineering solution to core problems facing the businesses he has started or taken over. The problem with content is that it’s not something a well-designed machine has ever been shown as effective at moderating well.

Other barriers to Musk achieving his X everything app vision for Twitter include the anti-trust environment in the USA which is very different to China’s. It’s difficult to see regulators allowing one company, especially a company majority owned by Tesla’s major shareholder, to have the same level of influence and monopoly in the USA that WeChat has in Asia.

A bet on the Twitter share price now is a bet on Musk himself

Whatever the eventual outcome, if there are no final twists to this tale and Elon Musk takes majority ownership of Twitter before the end of this month, it’s almost guaranteed to be a dramatic ride. It looks like Musk will shake Twitter to its roots and after his initial shock treatment, start the microblogging platform on a path towards becoming much more, even if completely mirroring Asia’s super apps proves impossible in the West’s anti-trust environment.

But if he achieves even part of what he has said he plans to, Twitter should be worth far more than it is today 2, 5 and 10 years from now. If he will or not, is very hard to tell at this stage. An investment in Twitter at its current share price is an investment in Musk. And his ability to put in place a board and management that will execute his vision while he continues to split his time between Tesla, SpaceX and his other ventures that should soon include the app.

But he’s been proving his doubters wrong for a long time now. As the analyst Benedict Evans tweeted in February 2021:

“Elon Musk is a bullshitter who delivers. This breaks a lot of people’s pattern-matching, in both directions,”

Can he deliver again? Calling it now would be high risk but plenty of investors will be keeping a close eye on Twitter under Musk over the months ahead for early clues he might.

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