Twitter and Elon Musk: “I love you, neither do I”

Posted Oct 11, 2022 3:17 PMUpdated Oct 27, 2022 5:43 PM

Engagement, divorce, then finally marriage… The Twitter soap opera is worthy of a television series with its cascading twists.

Barring a last-minute surprise, the group with the blue bird and the billionaire should get married this weekend.

In a message to advertisers, Elon Musk clarified his intentions and formalized the takeover, via a tweet. He explains that he buys this social network because it is “important for the future of civilization to have a public square online where a wide variety of opinions can debate in a healthy way, without resorting to violence”.

“That said, Twitter obviously cannot be a hellish place open to everyone, where anything can be said without consequence,” he also noted in this message. A way of reassuring when most of Twitter’s revenue comes from advertising.

An epilogue after several months of progress and setbacks. Update on this complex file, its implications and the future of the microblogging specialist.

Twitter and Musk: Why these reversals?

When the market discovered the stake taken by the founder of Tesla, at the beginning of April 2022, there was excitement on Wall Street. The billionaire, who now has more than 108 million subscribers on the social network and is a heavy user, has become its largest shareholder, with the acquisition of 9.2% of the capital.

But very quickly, the first questions arrive, as the founder of Tesla continues to publicly criticize the microblogging site (going so far as to wonder if it is dying) and gives up having a director seat. He had also asked his followers – with the provocation that often characterizes him – if the headquarters of Twitter should be transformed into a shelter for the homeless…

Finally, in mid-April, Elon Musk surprised again by announcing that he was making a purchase offer on the social network for more than 40 billion dollars. He justifies this attempt in particular by his concern about freedom of expression, which would be endangered by the moderation policy of the social network.

At the end of April, the offer was accepted by the San Francisco group’s board of directors. Many observers then think that the soap opera stops there. But that’s without counting on the unpredictable Elon Musk: in mid-May, he gave investors a cold sweat by announcing that he was suspending the takeover and bringing down the price of Twitter.

In question ? Bots (see below). Then for weeks, Musk blows hot and cold.

At the beginning of July, a thunderclap: he finally announced that he would give up the takeover of Twitter.

The market is in shock. The two groups are preparing for a long legal battle. Twitter retaliates against Elon Musk with a scathing complaint and the latter attacks him in turn.

Twitter stock has been yo-yoing on Wall Street in recent months.

While markets and industry observers are impatiently awaiting the trial between the two, Elon Musk’s new volte-face in early October: the billionaire finally chooses to resuscitate his offer at the price initially agreed (54.20 dollars per share).

· What future for Twitter in this complicated context?

The blue bird group recorded a loss in the second quarter.

The blue bird group recorded a loss in the second quarter.REUTERS/Robert Galbraith/

Despite the announcement of the imminent marriage with Elon Musk, the future does not look rosy for Twitter.

On the one hand, to avoid the prospect of a long, costly and risky trial, the billionaire will have to write a check for some 44 billion dollars for a group which he no longer wanted a few weeks ago and even though the context is not looking good for the values ​​of tech… On the other hand, the social network finds itself with a future boss who has not stopped criticizing it publicly and who has never really expressed his real intentions for the future of the group.

The company headed by Parag Agrawal is also not in the best of shape. It ended the second quarter of 2022 in the red. Precisely, the social network shows a net loss of 270 million dollars, while it had made a profit at the same time last year So certainly, the multiple twists and turns of recent months have not helped the network to focus on the future, and have caused costs, but the social network is also suffering from the decline in online advertising expenditure, linked to macroeconomic uncertainty.

Above all, the microblogging site has never really been a “cash machine” and has long had difficulties. Like many social networks, the company derives its revenue primarily from targeted advertising. But it does not have the scale of a Meta in number of subscribers.

But, unlike other big networks, Twitter is not a platform for the general public: it is used by leaders, journalists, activists, news enthusiasts and so on. In a recent study, the Pew Research Center pointed out that only 13% of American adults regularly use Twitter to seek information, but 70% of journalists use it in their work.

Difficult to know precisely at this stage what Elon Musk will do with it. “Buying Twitter is a way to accelerate towards the construction of ‘X, the total application’, he tweeted recently. A few months ago, he mentioned the WeChat model in China, an application that has experienced impressive growth, allowing you to chat with your friends, but also to order goods and services.

For months, he has been blowing hot and cold on the group. He would have said that he intended to cut 75% of the workforce, reports the “Washington Post” but would have finally assured employees, in recent days, that he would not do so.

This week, the whimsical boss arrived at the group’s premises… with a sink. He posted a short video on the social network, to make a pun with “sink” which means both sink and absorb information.

· What about the “bots” at the center of the conflict?

Twitter and Elon Musk have clashed over the number of fake accounts.

Twitter and Elon Musk have clashed over the number of fake accounts.REUTERS/Dado Ruvic

Elon Musk’s procrastination is largely related to the subject of “bots”. From the spring of 2022 – shortly after the announcement of the takeover – the businessman began to worry about them. According to Twitter management, there are less than 5% fake accounts, based on “monetizable” daily active users, which were 229 million in the first quarter. But, for Elon Musk, this figure could be much higher. He had even indicated that fake accounts could represent 20% or even reach up to 90%, reports the Bloomberg agency.

It was this assessment of the bots that he had put forward to abandon the takeover of the social network in July.

It is difficult to say precisely who is right and who is wrong. “Recent research estimates the proportion of fake accounts at 15% through bots. But on certain subjects, in particular stock market recommendations, the proportion can be 70%”, explained to “Echos” a few weeks ago Stefano Cresci, researcher specializing in the subject, at the Istituto di Informatica e Telematica (Italy).

Anyway, this issue of bots resurfaced recently, as Twitter’s former security chief accused Twitter of covering up vulnerabilities in its protection system and lying about fighting fakes. accounts. What the microblogging site refutes en bloc.

Precisely, Peiter Zatko, a former hacker, dismissed at the start of the year, would have been particularly worried about the number of bots at the beginning of 2021 and he would have been made to understand that the company had no desire to measure fake accounts.

In September, he reiterated his charges before the US Senate.

Twitter key figures

In the second quarter, Twitter had almost 240 million so-called “monetizable” active users (precisely, 237.8 million up).

In 2021, it had revenue of around $5 billion and a loss of some $220 million (due to a legal expense). The vast majority of Twitter’s revenue (about 85%) comes from advertising.

· What cascading implications in the world of finance?

Some hedge funds had bet on a positive outcome to the conflict.

Some hedge funds had bet on a positive outcome to the conflict.REUTERS/Lucas Jackson

The announcements of buying, abandoning, and then reacquiring put the nerves of investors and banks to the test. If the abandonment of the deal in July had deprived the banks of juicy commissions, the last announcement of the marriage, at the beginning of October, is a relief for the shareholders of Twitter but is not necessarily good news for everyone. The pool of banks led by Morgan Stanley, Bank of America and Barclays was to find takers for 12.5 billion dollars of debt in a very deteriorated context. And the problem also concerns French banks (BNP Paribas and Société Générale).

According to the “Wall Street Journal”, they considered, a few days ago, to give up reselling in the market – to syndicate in the jargon of bankers – the 13 billion dollars of debt necessary for the acquisition, of which 1.35 billion for French banks. This debt that remains on their hands would be the biggest “glue” of all time, according to the American daily, including the major financial crisis of 2008.

On the other hand, the billionaire’s recent volte-face has made people happy among hedge funds. Like Carl Icahn, some investors had shopped in Twitter shares betting on a favorable outcome to the conflict…with success.

As for Elon Musk, even if he now has to write a big check to acquire Twitter (all the more important since he is responsible for the fall in the price this summer, after the announcement of the abandonment of the deal), he remains the richest man in the world…

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