by Michelle Chapman, Matt O’Brien and Tom Criser
In 10 days, Tesla CEO Elon Musk has gone from critic of popular Twitter contributor and the company’s biggest individual shareholder to owner of the social platform — a whirlwind of activity that has seen the sometimes cynical billionaire’s self-seeking service dramatically may change. Identified as a free speech absolutist.
Twitter disclosed in a securities filing on Thursday that Musk has offered to buy the company outright for more than $43 billion, saying the social media platform “needs to be transformed into a private company” so that To build trust with your users.
“I believe that free speech is a social imperative for a functioning democracy,” Musk said in the filing. “Now I realize that the company will neither thrive nor meet this social imperative in its current form.”
Later in the day, during an onstage interview at the TED 2022 conference, he went on to elaborate: “Having a public forum that is more credible and broadly inclusive is extremely important to the future of civilization. “
Since it burst onto the scene in 2006, Twitter has been home to enriching social and political commentary, shared news, scandal gossip, cat memes and dress color arguments. But it has also provided a platform for viral misinformation and lies, bullying and hate speech and hordes of trolls who can shout out posters they disagree with, creating a tide of bad images, threats and similar acts of online aggression. expose the waves.
Twitter has put in a substantial amount of effort stanning the latter while preserving the former — though not always in the ways that satisfy most users. Like other platforms, it has established a ban on tweets that threaten violence, incite hate, threaten others and spread misinformation. Such rules stymied Twitter’s decision to ban former President Donald Trump in the aftermath of the 2021 Capitol uprising.
Twitter has also become a destination for brands and advertisers, many of whom prefer strong content restrictions, and a megaphone for high-profile figures such as Trump and Musk, who have used it to rally supporters and promote business ventures. done for.
Musk, who described Twitter as a “real city square”, on Thursday detailed some of the specific possible changes — such as favoring temporary rather than permanent restrictions — but mostly described their purpose in broad and abstract terms. .
He said he wants to open up the “black box” of artificial intelligence technology that is driving Twitter’s feeds to give people more transparency about why some tweets may go viral and others may disappear. “I personally wouldn’t be into editing tweets,” he said, “but you would know if something was done to promote, demote or otherwise influence a tweet.”
The billionaire has been an outspoken critic of Twitter, mostly because of his belief that it falls short on free-speech principles. The social media platform has angered followers of Trump and other right-wing political figures, who have suspended their accounts for violating its content standards over violence, hate or harmful misinformation. Musk describes himself as a “free-speech absolutist” but has also been known to block other Twitter users who question or disagree with him.
While Twitter’s user base is much smaller than that of rivals such as Facebook and TikTok, the service is popular among celebrities, world leaders, journalists and intellectuals. Musk himself has over 81 million followers, rivaling pop stars like Lady Gaga.
Twitter shares closed at $45.08, which is less than 2%, well below Musk’s offer of $54.20 per share. This is usually a sign that some investors are skeptical that the deal will go through. The stock remains well below its 52-week high around $73.
Musk called that price his final offer, though he did not provide any details on financing. The offer is non-binding and is subject to financing and other conditions.
Twitter said it would decide whether it was in the best interest of shareholders to accept the offer. However, it is not clear how Twitter’s board will react after evaluating the proposal. John Coffey, a Columbia University law school professor and head of its Corporate Governance Center, said it will likely negotiate, demand a higher price per share, or seek provisions to ensure the board remains independent of Musk.
Coffee said the board could adopt “poison pill” provisions to offer more shares and reduce the value of Musk’s stake if Musk’s stake rises to 10% or 15%. Even so, Musk could still take over the company with a proxy fight by voting out the current directors.
At the TED conference, Musk said he had the money. “I could technically afford it,” he said with a laugh.
Should Musk go through with his takeover effort, he could potentially raise the roughly $43 billion he needs by borrowing billions using his stakes in Tesla and SpaceX as collateral.
Most of Musk’s wealth, estimated by Forbes at about $265 billion, is tied up in Tesla shares. The company allows executive officers to use shares as collateral for loans, but limits borrowing to 25% of the value of the pledged shares.
Data provider FactSet says Musk owns 172.6 million shares worth $176.47 billion. According to a Tesla proxy statement, more than 51% of his stake is already pledged as collateral. That means Musk could use the remaining stake to borrow about $21.5 billion. He could also borrow on his stake in the privately held SpaceX.
Musk disclosed in regulatory filings in recent weeks that he had been buying Twitter shares in almost daily batches since January 31, ending up with a stake of about 9%. Only the Vanguard Group controls most of the Twitter shares. A lawsuit filed Tuesday in federal court in New York alleged that Musk illegally delayed the disclosure of his stake in the social media company so that he could buy more shares at lower prices.
Former SEC chief economist Chester Spat said the US Securities and Exchange Commission could penalize Musk for hurting other investors by taking too long to disclose his purchase of Twitter shares, but that the acquisition is unlikely. will do anything to stop it.
“It’s going to play out pretty quickly,” said Spat, now a finance professor at Carnegie Mellon University.
Jacob Frenkel, a former SEC enforcement attorney with Dickinson Wright Law Firm in Washington, said it’s difficult to prove an investor’s intent in disclosure cases. “The mere fact of a breach surrounding the disclosure does not necessarily mean that fraud took place,” Frenkel said.
However, there is “much fodder for investigation” whether anyone with knowledge of Musk’s stock purchases prior to Musk’s public disclosures traded in the stock, Frenkel said.
After Musk announced his stake, Twitter immediately offered him a seat on its board on the condition that he owned no more than 14.9% of the company’s outstanding stock. But the company said five days later that it had refused. The decision coincides with a barrage of Musk’s now-deleted and always-on-serious tweets, proposing major changes to the company, such as dropping advertising — its main source of revenue — and relocating its San Francisco headquarters to a homeless shelter. change into
Turnbout-led CEO Parag Agarwal warned employees earlier this week that “there will be distractions ahead” and to “tune down the noise and stay focused on work.”
Twitter hasn’t lost money in the past year as well as its social media rivals. The company reported a net loss of $221 million for 2021, largely linked to the settlement of a lawsuit by shareholders who said the company had misled investors about how much its user base was growing and that users How much did you interact with its platform? Its co-founder Jack Dorsey resigned as CEO at the end of November and was replaced by Agarwal.
“I’m not saying I have all the answers here, but I think we want to be very reluctant to remove things and be very wary of permanent sanctions,” Musk said. “It won’t be perfect,” he said, but there has to be an assumption and reality that speech is “as free as possible.”
