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The Challenges of An Elon Musk Takeover of Twitter

Elon Musk

The Tesla eccentric owner, billionaire Elon Musk, shocked the world this past Thursday when he made public his public offer to buy all the remaining shares of Twitter, marking the beginning of a hostile Elon Musk takeover of Twitter that could potentially change the fate of Big tech and social media.

Musk offered the Twitter board to buy 100% of its shares for $54 per share, a move that would cost a total of $43 billion of Elon’s money. The offer comes a few days after Musk became the largest stakeholder in the social media platform by buying 10% of its shares.

The $43 billion offer, however, is not a done deal and the potential Musk takeover of Twitter still faces a large list of challenges, as the takeover could change the face not only of the Big Tech industry but global politics as well. Hence, the Twitter deal would face challenges both in the financial and political worlds.

empresas tecnologicas, twitter, big tech
Musk started a hostile takeover of Twitter this Thursday (EFE)

The finances behind the Musk takeover of Twitter

The first and perhaps most important issue is the amount of cash that Musk is able to spend in a full takeover of Twitter. While initially, it might seem like a non-issue for the richest men in the world, the $43 billion deal is a significant amount of money even for Elon. According to calculations made by Forbes, Musk’s net worth is around $273 billion, making the Twitter deal around 15% of his total net worth.

Although that looks like a small dent in Musk’s finances, it is important to remember that net worth includes all assets (financial and non-financial) that a person has after subtracting all the liabilities. Hence, while Musk has more than $200 billion in his net worth, that does not mean he has all that money in his bank account waiting to be used, it only means that all of his assets have a cash value of $273 billion.

Even if he had the $273 billion in his bank account, $43 billion is not a small amount of money. To put this into perspective, Musk’s SpaceX is valued at $74 billion as of February of last year.

Musk’s move certainly puts pressure on the Twitter board as the offer is certainly a very lucrative one for the shareholders, forcing them to really consider the offer even if they are not looking forwards to selling the company to Musk, a tactic that is known as a “bear hug” in the financial world.

Analysts have had mixed feelings over a potential Musk takeover of Twitter, some are bullish on Musk’s offer saying that the South African billionaire’s offer is just too good for the Twitter board to refuse. Analyst Dan Ives of Wedbush Securities said in a note to his clients that “It would be hard for any other bidders/consortium to emerge and the Twitter board will be forced likely to accept this bid and/or run an active process to sell Twitter.”

Musk’s offer to Twitter’s board might be too good to pass (EFE)

There are many doubts, however, about how Musk can pull off the deal. According to a Wall Street Journal article, while Musk is very rich, most of his net worth comes from his shares in Tesla, as he doesn’t earn a salary from the company and has said before that he is effectively cash poor, meaning that it is very doubtful that Musk has enough cash to buy Twitter without having to sell shares in Tesla or borrow money.

The problem with selling Tesla shares is that it will cost him a hefty tax bill and would also reduce the power of Musk in his companies, something that sounds unlikely he will accept. The other option, to borrow money using Tesla’s shares as collateral, will mean that Musk would have to use all of his Tesla shares as collateral to finance a $43 billion loan to buy Twitter.

It is possible that analysts are wrong and Musk has already secured financing for his takeover of Twitter. The only thing that is clear, however, is that Musk’s takeover of Twitter is filled with uncertainty and the next days will be critical.

The Musk Twitter takeover and partisan politics

Money, although crucial, will not be the only issue surrounding the Musk takeover of Twitter, as political concerns will also surround the corporate infighting. Twitter plays a vital role in the shaping of public opinion and politics today, and Musk’s rhetorical defenses of free speech and continuous criticisms of Twitter’s aggressive content moderation or censure (depending on who you ask) have been a key reason why Musk bought Twitter shares in the first place.

The Musk takeover of Twitter will surely be debated within the partisan polarized lenses of American politics. Conservatives, appalled by the growing censure on Twitter, have already shown optimism over a potential Musk takeover of Twitter, while Liberals and mainstream media outlets have expressed outrage over the possibility of a billionaire owning a massive social media platform.

Musk’s decision to try to buy Twitter has been analyzed within the lenses of American partisan politics (EFE)

The Washington Post criticized Musk’s takeover of Twitter saying that his vision of free speech would be bad for the platform and called for regulations on social media to “prevent rich people from controlling our channels of communication.” A rather interesting thing to say in the Post, which has been owned by the second-richest man in the world (Jeff Bezos) since 2013.  

Musk’s ties with Beijing

A final concern over the effects of Musk owning Twitter is the billionaire’s close ties with the Chinese Communist Party, which have raised questions not only on the apparent hypocrisy of Musk’s open support of free speech in America while keeping deep business ties with one of the most repressive governments in the globe.

 Musk has a strong working relationship with Xi Jinping’s CCP, as Beijing rewrote its regulatory laws and offered Musk a substantial amount of tax incentives, cheap labor, and loans to shore up Tesla’s production and sale of electric cars in the Chinese market. As a result, Tesla makes more than half of its cars in China, and the company sold more than 74,681 Tesla Model Y cars in China during the first quarter of 2022. Tesla recently opened a massive factory in Shanghai

Tesla has close ties with China, even opening a store in the region where the CCP is conducting a genocide over the Uyghur population (EFE)

Tesla’s business closeness with china has also seeped into Musk’s public comments on the Beijing regime, who praised the CCP during its centenary last year saying that “The economic prosperity that China has achieved is truly amazing, especially in infrastructure!.” His company was also under fire a few months ago when it was revealed that Tesla had opened a new store in the Xinjiang province, the region where China is committing genocide against the Uyghur population.

In fact, just a few weeks before Musk announced his takeover of Twitter, the United States Congress expressed deep concerns over the close ties between Musk and Beijing and how that could have a negative effect on America’s national security.

If Musk’s plans to buy Twitter end up being successful, then it is almost sure that lawmakers would raise questions over the China-Musk relationship and how that could affect the American political environment.

Daniel is a Political Science and Economics student from the University of South Florida. He worked as a congressional intern to Rep. Gus Bilirakis (FL-12) from January to May 2020. He also is the head of international analysis at Politiks // Daniel es un estudiante de Cs Políticas y Economía en la Universidad del Sur de la Florida. Trabajo como pasante legislativo para el Representate Gus Bilirakis (FL-12) desde enero hasta mayo del 2020. Daniel también es el jefe de análisis internacional de Politiks.

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