There IS a lot we don’t know about Elon Musk’s gargantuan $44 (€41.2) billion deal to make Twitter private.
We don’t know, for example, exactly where he will get the $21 billion of his own fortune that he plans to put up for the purchase or whether we can expect him to bring in partners.
We don’t really know (and neither do Twitter employees or even its CEO, apparently) what kind of direction Tesla’s CEO plans to take for the social media giant once the deal is finalized.
We don’t even know if the deal will close with shareholders, and more importantly for Musk, given his habit of poking fun at them, regulators are yet to weigh in (although all indications are he shouldn’t face too many problems on both fronts).
But what do we know about the offer that just a week ago seemed more like a pipe dream or an exercise in trolling than a serious possibility? What has Musk said about his vision for the social media platform, and what do experts think will actually happen as long as the deal doesn’t fall apart in the meantime?
How does Musk pay for it?
Having initially aggressively rejected Musk’s offer, Twitter’s board had a hard time misleading him after the South African-born businessman laid out his funding plan last Thursday.
Those plans, contained in documents filed with the US Securities and Exchange Commission, give us a good idea of how he is financing the transaction.
Musk has tied up a team of banks to provide debt, including a €12.5bn margin loan (a loan used to buy shares) secured by $62.5bn (€58.6bn) of his Tesla shares, for a total value of 25.5 billion dollars (23.90 euros). billion. His sponsors include Morgan Stanley, Barclays, Société Générale and Bank of America, among others.
That is the first piece of the puzzle. The second piece, valued at 21 billion euros (19.7 billion euros), will come from Musk’s deep pocket.
The billionaire is worth an estimated €288.6 billion on paper. But despite enjoying a personal fortune that would make a pharaoh blush, there are still question marks over this part of the deal.
The bulk of Musk’s billions is tied up in Tesla stock and, according to Bloomberg at least, he may have as little as $3 billion available in cash and some liquid assets. Analysts believe he could still bring in partners from this side of the deal or else have to sell some of his stake in the automaker.
What do you plan to do with the company?
It’s hard to say for sure. Even Parag Agrawal, the current CEO of Twitter, doesn’t seem to know what all this means for the company’s management.
Switching to a subscription model and introducing an edit button are two of the ideas Musk has floated in the past. Musk also issued a statement last night, laying out a number of ideas.
The self-styled “absolutist” of freedom of expression said: “Freedom of expression is the base and Twitter is the square of the digital city where vital issues for the future of humanity are debated.”
He added that he wants to “unlock” Twitter’s “tremendous potential” by “improving the product with new features, making the algorithms open source to increase trust, defeating spam bots, and authenticating all humans.”
But Musk, who has spoken out against Twitter’s content moderation policies, may have a hard time loosening the platform’s rules in the current political and regulatory climate, experts believe. He, too, may have a hard time convincing advertisers that it’s a good or even acceptable idea.
Peter Vidlicka, a media expert and co-founder of the free public relations site Newspage, said that while Musk’s deal could help Twitter “regain its mojo,” it could also cause conflict.
“We can expect fireworks in the coming months,” he said.
To many, Musk’s purchase of Twitter will be seen less as a hostile takeover than as a cultural stand, a free-speech bolster and a much-needed authentication of ordinary people and their everyday views.
But he added: “Describing Twitter as a digital public square is a patronizing metaphor that doesn’t necessarily convey the chaos that often unfolds there. It is a square of the digital city, after the hour of exit”.
On the subject of content moderation, the European Commission, which has just introduced new legislation aimed at holding social media companies accountable for harmful content, has already hit Musk on target.
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“Whether it’s for online harassment, the sale of counterfeit products… child pornography or calls for acts of terrorism… Twitter will have to adapt to our European regulations that do not exist in the United States,” EU Commissioner Thierry Breton told AFP. .
Regardless of the shareholders, from now on Twitter will have to fully adapt to European regulations,” said Breton, who runs the EU’s industrial policy portfolio and was a key supporter of the new laws.
“The law will now be very clear, much clearer in Europe than in the United States, with more rules in Europe than in the United States.
There are still a couple of hurdles for Musk to clear in his takeover bid.
On the one hand, Twitter shareholders will have to approve the deal, for which they will be paid $52.40 (approximately 51 euros) per share they own. That’s about 38% more than they would have received if they sold their shares just before Musk publicly disclosed his stake in the company in early April. It’s also 21% higher than Twitter’s average share price for the first few months of the year.
In other words, it’s a serious and potentially lucrative offer and it looks like it will be approved, possibly at Twitter’s annual general meeting on May 25.
The acquisition will also be scrutinized by US regulators such as the Federal Trade Commission to see if it raises any competition concerns. That seems unlikely given that Musk isn’t acquiring a competitor.
There is also the possibility that the deal will fail for some reason in the interim if, for example, some of the financing does not come through. In that case, Bloomberg reported yesterday, Musk will likely have to pay billions of dollars in “rest fees,” also known as failure costs.
— Additional PA report and © AFP 2022