Musk Makes Market Manic!
So, Elon Musk is buying Twitter. Probably.
I barely use it, so I am coming at this not as a lover/user of the product, but as an observer of the news and financials surrounding the deal.
In no particular order, here are some thoughts.
1.) It’s not a done deal until it’s a done deal. A bit obvious, yes, but this is a huge financial commitment. We’ve all experienced some sort of buyer’s remorse, where a purchase that seemed like a great idea on a Monday loses its luster in the cold light of Friday. Well, this one is $44 billion worth of potential remorse. It wouldn’t surprise me a bit if Musk wakes up in a few days or weeks and thinks “Oh, f*ck. What was I thinking???”
2.) When you run a car company, you can dictate every facet of every detail, right down to what the turn signal click sounds like when you turn them on. In the case of Twitter, Elon may own the company, but he has very little control over the product, which is produced by hundreds of millions of users, all over the world and is literally changing by the day, hour, second and nanosecond.
3.) Some people of a certain age will remember the old TV commercials for Remington electric razors where Victor Kiam declared “I loved the razors so much, I bought the company!” He was a smart businessman and turned the company around.
Musk is clearly a passionate user and lover of Twitter. But newsflash: I love my iPhone, my car and my toaster oven. But if I bought the companies that made ANY of those products, I would run them straight off a cliff. (Note: NOT comparing myself to Elon Musk…)
My point: Love of a product doesn’t necessarily translate to success of a company. Elon Musk is a smart guy. He builds innovative cars and history/industry-changing rockets. Can he bring that skillset to the unwieldy beast that is Twitter? Time will tell. Doubts abound.
4.) There are multiple reasons why this deal may not happen:
- Elon gets bored. He’s kind of a flake, so he may just move on to the next thing.
- Elon gets scared. (See point #1)
- Elon gets religion about how hard it will be to run this company (versus just using the product.)
- Tesla stock drops. This is a big one. Musk is borrowing billions and securing the loan with Tesla stock. If the price drops, the banks will tell him he has to put up MORE stock to cover the difference in valuation, or he will have to sell stock to cover the difference. Either way, Tesla stock and Elon Musk take a huge hit. To this point, Elon Musk may be the world’s richest person, but most of his wealth is tied up in the value of his Tesla holdings. If he really wanted to put his money where his mouth (and thumbs) are with regard to Twitter, he could have sold enough Tesla stock to buy Twitter with his own cash instead of borrowed cash. But that would have involved him paying taxes and pushing Tesla stock price down and all the implications and regulatory filings (from which Elon Musk seems to think he is exempt) that come with a CEO selling his holdings in his own company. So he did what most guys with his kind of wealth do: borrow against stock holdings, avoid taxes and hope the stock price stays up. If not, Elon WILL get a call (and/or a DM) from his bankers.
- Another, better offer comes in. Not likely, but possible.
5.) Musk’s argument that “Twitter = town square = free speech” is the childish rantings of someone who lacks a third grade understanding of the Constitution. Twitter is a technology/media platform, nothing more or less. The current owners have every right to allow or ban anyone from the platform, just as Elon Musk will enjoy that right once he is the sole owner. But to make the specious “First Amendment” argument regarding Twitter is to cast your lot with liars, idiots and charlatans. The First Amendment does not apply to private businesses. Full stop.
Finally, a point about Twitter: It is very influential to a very small segment of the world: Media, politicians, celebrities, academics, some number of regular people. But there are billions of people (myself included) who live thoughtful, productive, meaningful lives spending little or zero time on Twitter. The buzz around this deal is a classic “echo chamber” situation, wherein a tiny portion of the population thinks it’s the biggest news story since the moon landing (an actual really good story involving rockets that many people on Twitter claim never happened), and the rest of the world could not give the tiniest of sh*ts or even have any idea that all this is going on.
So, for the few who care, keep an eye on your Twitter and news feeds for the next shoe to drop. It could be that Elon Musk decides to buy the New York Times instead so he can “out Bezos” Jeff Bezos in another industry. Or it could be Elon is buying the State of Hawaii so he can grow his own special weed. Anything is possible and nothing would surprise me a bit.