Twitter: Elon Musk’s risky political bet

Elon Musk shares with Donald Trump some character traits and… an inordinate love for Twitter – at least, as far as the former president is concerned, until he is out of it after the US elections in 2020. Since October 27, economic news has been dominated by the acquisition of the social network Twitter by the richest man in the world, whose fortune was estimated, at its peak in April 2022, at 273 billion dollars.

What sets Twitter apart from other social networks is the concept of microblogging, that is, the possibility of sending a short public micro-message, free of charge and immediately. It is far from being the most widely used social network (more than 300 million users compared to almost 3 billion for Facebook) but it is popular with politicians, influencers, personalities and the media. More than other social networks used to share content (messages, images or videos) within a group, Twitter has a public dimension that makes it an unparalleled political sounding board.

Since April 14, and Elon Musk’s announcement of an unfriendly takeover bid for $44 billion of the company’s entire capital, the fight is underway with the company’s management for its control. After withdrawing his offer and threatening a lawsuit by Twitter management, Elon Musk decided to buy back at the announced price, more than 6 billion more than its market estimate, all shares available. In fact, the company is no longer listed.

This operation does not address the industrial or financial logic behind mergers and acquisitions. From an industrial perspective, Twitter is a different activity and market from the companies already owned by Elon Musk (Tesla or Space X). The activity closest to this is the satellite Internet service provider, Starlink, but apart from the fact that they are two communication companies, there are no obvious synergies.

When it is not industrial, the other motivation for a merger and acquisition is often financial: it is a question of buying a growing company in a buoyant market. However, in this respect, the tech sector, and specifically social networks, seems to be experiencing its first growth crisis. After steady growth in users and advertising revenue, there has been a noticeable slowdown over the past two years.

Meta, the group owned by Mark Zuckerberg, which is the parent company of Facebook, Instagram and Whatsapp, the market leader, announced on November 9, for the first time in its existence, a layoff plan for 11,000 employees. , or 13 % of the group’s workforce.

Twitter itself, after posting profits in 2020 for the first time in its history, returned to the red in 2021 with a $221 million loss for $5 billion in revenue. At the time of the acquisition, Twitter seemed to be struggling to find a sustainable business model. Based on more than 90% of advertising revenue from major brands, revenues suffer from very slow growth in the number of users. The social network’s media coverage is inconsistent with its financial situation.

A confusing approach

The new owner’s strategy for raising the bar is vague to say the least. So far, its implementation has been particularly messy. Libertarian insists, Elon Musk proposes a new strategic project that revolves around a simple slogan: to make the social network a vast political agora where freedom of expression will be absolute. As a result of this measure: moderation, which consists of fighting robots, trolls, misinformation, malicious or hateful messages, the risks will be reduced to their minimum.

In the process, the billionaire announced that he wanted to drive change in the business model by developing a paid certification service, Twitter Blue, open to everyone for 8 dollars per month. Until then, the certification (the ” blue tick ”) is limited to high-profile personalities, brands and news agencies after a thorough vetting process.

The offer was broken: without real control from Twitter, a mass of fake profiles invaded the social network, multiplying frauds, such as this message from a fake account pretending to be the pharmaceutical company Eli Lily and insulin was announced to be free.

This chaotic beginning made press headlines and caused great confusion among advertisers. Faced with reputational risks, several major accounts immediately announced they would stop funding Twitter. Faced with controversy, Elon Musk was forced to suspend Twitter Blue on November 10, just two days after its launch, and now promises a new version ” concrete for November 29.

These chaotic beginnings emphasize that the purchase of Twitter does not respond to a financial logic but first of all to a desire for political and media power of the entrepreneur.

Another proof of the unpreparedness of the operation and the lack of business knowledge: the embattled multi-billionaire has multiplied since October 27 sensational and often contradictory announcements. His first decision, particularly brutal, was to announce on November 4 the layoff of half of the company’s employees and its entire staff.

At issue: financial losses, presumed overstaffing in support services (“ There are ten people in charge for one coding “, he pointed out in October on Twitter) and management practices (in particular teleworking) that the new owner does not support.

Specialists immediately noticed the contradiction in charging for a subscription while reducing moderation activity, which plays an important role in giving users confidence. And in this chaos, the boss also seems to be pulling back on some layoffs, urgently asking his new teams to recall employees whose skills seem important.

These ventures have no consequences on the stock market valuation of the companies owned by the entrepreneur. Concerned about the consequences of these disturbances and the amount of debt contracted to finance the acquisition of Twitter, financial markets have allowed Tesla’s stock to fall by 15% in recent days.

An instrument in the service of a desire for power

These turbulent beginnings emphasize that the purchase of Twitter does not respond to a financial logic but first to a desire for political and media power of the entrepreneur. After wanting to save the planet with the electric car, then conquer space by sending manned missions to Mars, Elon Musk multiplied geopolitical initiatives, via Twitter, that didn’t work reluctant to play his own diplomatic score by encroaching on the sovereign domain of the States: proposal to create a special administrative zone for Taiwan attached to China; proposal to annex Crimea to Russia and neutralize Ukraine to end the war; restoration of Internet in Iran or Ukraine thanks to its Starlink network, etc.

Like Donald Trump, Elon Musk is a fan of government tweeting. Like the former president, through this channel he seeks to impose his agenda, shock, provoke, even manipulate markets and opinions. The chaotic and blatant contra-establishment playing politics as a show contrasts with the careful political action of top executives of large companies to secure the support of politicians.

Like Donald Trump, Elon Musk broke the codes, confusing the actions of regulators and analysts. He kept flirting with the red line. So after he announced that Tesla’s stock price was too high, the US stock market watchdog SEC investigated Musk for stock price manipulation.

In the United States, more than anywhere else, the power of companies and their bosses is only valid as long as they play the game of national interest on which they depend for their markets and for tax relief if where they benefit.

Elon Musk may be content to remain one of the most followed personalities on Twitter, with more than 115 million followersand do the buzz in the media. His desire to get his hands on social network challenges. Is freedom of expression so threatened that 44 billion dollars have to be put on the table to protect it? The argument seems short and questions the true motivation of the billionaire.

The highly political nature of the Twitter takeover is unquestionable. Just look at the immediate reactions of political leaders, especially of Americans: both Joe Biden, considering it a threat to democracy, and Donald Trump, judging it good news for freedom in expression

By taking control of this politically strategic media, Elon Musk is taking a huge risk. The damage to its image and that of its companies, of suffering the wrath of regulators and of being separated from the public principals on which its space activities, but also vehicles or communications, largely depend .

Because we must not forget that in the United States, even more than elsewhere, the power of companies and their bosses is only valid as long as they play the game of national interest on which they depend for their market and for the tax assistance they do. receive Mark Zuckerberg, who wanted to launch his private currency, Libra, which was finally abandoned, recently had a bitter experience of this. We do not play cat and mouse with impunity with the leaders of the first world powers.

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