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Elon Musk buys Twitter: Everything you need to know

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Edgar Cervantes / iandroid.eu

After months of controversy and negotiation, it’s official: Elon Musk of Tesla and Starlink fame now owns Twitter. The deal, valued at $44 billion, represents the biggest social media buyout since Facebook acquired WhatsApp in 2022. As a public-facing social network, however, many speculate that Twitter could undergo some drastic changes under Musk’s ownership. Here’s everything you need to know about the terms of the deal and how Twitter could change in the future.

How did Elon Musk buy Twitter?

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Before Elon Musk bought it, Twitter was a public company listed on the New York Stock Exchange. Since the company went public in 2022, individuals and institutional investors could buy shares of the company on the open market. In fact, Musk already bought a 9.2% stake in Twitter before he made an offer to buy the whole company and take it private.

Musk’s 9.2% stake was enough to guarantee a seat on the board of directors. It also made Musk the single largest shareholder of the company, dwarfing even Twitter founder Jack Dorsey’s 2% stake.

Even before offering to take Twitter private, Musk owned a 9.2% stake in the company.

However, the sub-10% stake wasn’t enough to make decisions at Twitter and Musk would have to convince other members of the board to side with him. Twitter also prevented him from acquiring over 14.9% of the company for the duration of his board term, until 2024. Likely because of these two factors, Musk declined the board seat and presented the board with an offer to buy out the entire company.

In April 2022, Musk offered to purchase Twitter outright in exchange for $44 billion in cash. That worked out to $54.20 per share, a significant premium over the stock’s price at the time. In other words, existing investors would receive a 38% higher cash payout if Musk’s offer went through versus selling the shares on the open market. After some initial hesitation over Musk’s ability to secure funding, Twitter’s board accepted the buyout offer. The company said, “The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.”

Musk’s $44 billion buyout gave former Twitter stockholders a 38% premium over the company’s share price.

As for funding, Reuters reports that Musk used a mix of equity and debt financing to close the $44 billion deal. He also sold over $15.5 billion worth of Tesla shares since April, giving him enough capital to pay over $27 billion from his personal assets. Musk then approached banks for another $13 billion in loans, with Morgan Stanley contributing roughly $3.5 billion to the cause. The final $5.2 billion came from various investment groups. This included venture capital firms like Sequoia Capital, holding companies like Qatar Holding, cryptocurrency exchange Binance, and individual investors like Saudi Arabian Prince Alwaleed bin Talal.

Why did Elon Musk buy Twitter?

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Elon Musk’s desire to own Twitter stems from his own usage of the platform. Musk is a regular poster on Twitter and with over 111 million followers, he owns the third most followed account on the website.

Despite his affinity for the platform, however, Elon Musk has been a vocal critic of Twitter. From content moderation to revenue generation, he criticized many Twitter policies in the months leading up to the ownership change, usually in the form of tweets.

Under his ownership of Twitter, Elon Musk wants to increase revenue, eliminate spam accounts, and enable more diverse discourse on the platform.

Musk also complained about spam and bot accounts on the platform. Days after his buyout offer, Musk promised to eliminate these accounts and authenticate legitimate accounts if his bid went through. It didn’t end there, though. A few weeks later, Musk tweeted about putting the deal “on hold” as he demanded Twitter management provide proof that only 5% of accounts were spam or bot accounts. The debate dragged on for months, only for Musk to eventually relent and buy Twitter according to the terms of the original deal.

Musk also criticized existing Twitter management’s content moderation policy, which he claims has unfairly silenced certain political interests and jeopardized free speech on the platform. Musk asserted that “Twitter is the digital town square where matters vital to the future of humanity are debated.” Under his ownership, Musk said that he hopes Twitter will move away from issuing permanent bans and allow “legal free speech” to stay on the platform.

What will Elon Musk do with Twitter after taking it private?

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Now that Elon Musk has completed the deal and owns Twitter, existing shareholders will get their payout of $54.2 per share. After that, they will not have a say in the day-to-day affairs or general direction of the platform as they have no stake in the company. 98% of shareholders voted to accept the offer.

As for Twitter’s fate, it’s a little less clear. Musk has already made some big moves after assuming control over the company.

On his very first day, Musk tweeted, “The bird is freed,” a nod to both Twitter’s logo and his criticism of the platform’s restrictions. He then went on to fire the company’s CEO, CFO, and general counsel. The latter, Vijaya Gadde, was also the company’s policy chief and believed to be responsible for suspending the Twitter account of former US President Donald Trump.

Moving forward, Elon Musk said he hopes to bring in more revenue and make Twitter less reliant on advertising. In a pitch deck from before the sale, Musk outlined specific goals such as increasing revenue from $5 billion to $26.8 billion by 2028 and cutting advertising revenue reliance by half. Musk also plans to introduce monetization features for larger accounts and grow the company’s payment business to bring in $1.3 billion by 2028. This is not without precedent as Elon Musk co-founded PayPal and was the CEO of the company until 2000. Twitter currently only allows users to tip each other using cryptocurrency.

Elon Musk plans to boost revenue, loosen content moderation, and tailor Twitter’s algorithm to make the platform more entertaining.

As for Twitter’s content moderation, social media researchers and experts have expressed fears over Musk’s goal to loosen policies. They warn that the platform could become overrun with hate speech, trolling, and misinformation under the guise of free speech. The Tesla and SpaceX CEO hasn’t addressed these concerns directly. However, in a tweet to Twitter advertisers, Musk promised that he wouldn’t let the platform become a “free-for-all hellscape, where anything can be said with no consequences.”

Ultimately, Musk says he wants to create a curated experience on Twitter where users can opt into the content they wish to see. That could look like TikTok, which tailors users’ feeds depending on their preferences, or something else entirely. Only time will tell.

In the longer term, Elon Musk said that buying Twitter was just the first step of a grander plan to build X, an “everything app”. Once again, it’s unclear if this idea will conform to existing super apps like WeChat and Grab. In Asia, these single apps are commonly used for messaging, payments, shopping, food delivery, ride-sharing, and more. A leaked transcript of Musk’s town hall meeting with Twitter staff revealed that he at least considers WeChat a source of inspiration for the future of the platform. According to his pitch deck, Musk hopes to have over 100 million X users by 2028.