The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
Expert reveals what Musk’s Twitter takeover could mean for the platform and financial markets
In recent news, Elon Musk has acquired Twitter, after the platforms board accepted Musk’s buyout offer of $44 billion. I thought you would be interested in a comment from a financial expert on the subject.
Krisztian Gatonyi, senior analyst at international broker comparison site BrokerChooser shared his thoughts on Elon Musk buying Twitter:
“Twitter has approved Musk’s $44 billion acquisition bid, making this one of the biggest leveraged buyouts in history. Morgan Stanley helped secure $25.5 billion in funding for the deal, including $12.5 billion as Tesla stock collateral. Musk did not worry about the risks, because he thinks it is extremely important to the future of civilization to have a public platform that is maximally trusted.
They agreed on a price of $54.2 per share, which is a 38% premium over the day before Musk’s investment decision was announced publicly. According to him, after the transaction is done, the company will become privately held.
Twitter is popular for its microblogging feature, with real-time conversations among 217 million daily users, making it an attractive platform for celebrities, media personalities, politicians and engineers like Elon Musk.
Musk has more than 85 million followers and has been on Twitter since 2009. Approximately 70% of his tweets were about Tesla and SpaceX, while the remaining 30% were on topics of politics, manufacturing, crypto and sustainability.
Musk had questioned Twitter’s commitment to free speech many times. With this acquisition, he claims his goal is to promote free and open speech on social media and make Twitter better than ever by:
Using an open-source algorithm
Defeating spam bots
Verifying all users
Adding an edit button that allows changing tweets after they’ve been published
On the other hand, he has often blocked his critics on Twitter, which goes counter to his “free speech” argument. As an owner, he will now be able to silence them.
Elon Musk used Twitter in a way that led to several run-ins with the Securities and Exchange Commission, including when he tweeted in 2018 that he would take Tesla private at $420 a share and had “funding secured” to do so. These types of sensitive posts can move markets, which is penalized by the SEC.
Social media usage continues to grow and Twitter is a popular platform because its users are forced to communicate in a straightforward and concise manner, using only 280 characters at a time. Musk is committed to free speech on social media, so he will push Twitter in this direction. On the other hand, he will stick to his role of financial influencer and his main topics will probably remain Tesla and SpaceX, while he will share his thoughts on other issues, such as Bitcoin and NFTs.
Elon Musk is the 8th most followed person on Twitter and probably will move up on the list as the owner of Twitter. He can move markets by tweeting about financial products, so it will be interesting to see how the SEC handles it in the future. My belief is that penalties should be proportional to total net worth in order to have a real impact.
After Musk announced his investment decision publicly, Twitter’s share price increased more than 25% while Tesla decreased almost 20%. Twitter accepted Musk’s offer 2 days before publishing its quarterly report – maybe this is not a coincidence.
I think the stock market is in a bubble and the pin that will burst it may be the Fed’s tightening cycle.”