Elon Musk enters Twitter (with a sink)

Yesterday Elon Musk walked into Twitter headquarters carrying a sink. 

Entering Twitter HQ – let that sink in! pic.twitter.com/D68z4K2wq7

— Elon Musk (@elonmusk) October 26, 2022

His comment was, “let that sink in!”

In theory, this phrase would precisely mean “let that sink in,” but it is a play on words with the physical sink. 

The reference, ironically, is probably to all the criticism he has received over the past few months that the new direction he might give the social network could cause it to sink. 

Musk is no stranger to jokes of this kind, so he should not be taken too seriously when he makes such outbursts. 

Twitter’s problems and Elon Musk’s entry

Twitter has had some problems, including financial ones, for quite some time now. 

However, what is most objected to Musk is that his direction could disrupt the social network to such an extent that users would flee, and on the other hand that his buyout plan has too many demands and costs too much. 

In fact, in order to make the $44 billion purchase plan sustainable, $13 billion of which was financed by banks, there would need to be a need for Twitter’s revenues to take off. 

However, this has not happened in recent years, and indeed even several financial statements have been closed at a loss. 

Moreover, Elon Musk has no experience whatsoever in how to run a social network, although he seems to have a friendship with Twitter’s celebrated co-founder and former CEO, Jack Dorsey. 

The fact is that the company Twitter had long since been a public company, with lots of small shareholders of which the main ones were investment funds. In such an environment Dorsey’s freedom of action was very limited, but that will now change. 

Elon Musk’s era for Twitter kicks off

In fact, Elon Musk is buying virtually all the shares, so he will be the de facto sole owner, and with Twitter, he will be able to do what he wants with it. 

Actually, this is what scares many analysts, namely the fact that an eccentric billionaire like Musk can do something crazy without anyone being able to really stop him, thus sinking one of the most historic and important social networks in the world. 

By necessarily requiring that revenues multiply in order to make his gigantic acquisition project sustainable, Musk will be forced to make major decisions by imposing radical and profound changes in a business that has been used to working in a certain way for 16 years now. 

This is for all intents and purposes a gamble, but Musk is used to gambling in this way. Moreover, although it has not always worked out well for him, over the course of his career he won several big “bets” akin to the one he undertook with Twitter. 

Today the final agreement to acquire the company is expected to be closed, so starting next week the Musk era of Twitter will in effect begin. There is also speculation that he may appoint himself as the new CEO. 

In fact, he even changed the biography on his official profile yesterday, writing “Chief Twit.” 

Chief is also the first word for Chief Executive Officer, or CEO, and means “boss.” 

There is no doubt about the fact that Elon Musk will become the head of Twitter by purchasing all of its shares. Whether he will also become the company’s chief executive officer, or CEO, remains to be seen. 

The long negotiation for the acquisition

Musk made his takeover offer addressed to Twitter shareholders in April. 

However, in May he decided to temporarily suspend the purchase, and in June he claimed he wanted to withdraw the offer. 

The shareholders sued him, and that lawsuit was supposed to be concluded in October itself. Musk, however, then decided not to go any further with the lawsuit, and cut his teeth by deciding to resurrect his takeover offer on virtually the same terms as in April. 

It is possible that difficult market conditions in May prompted him to pause, mainly because of the sharp decline in the value of Tesla shares, of which he is CEO and largest shareholder, but not the owner. 

Between 5 April and 25 May, Tesla lost 45% on the stock market, perhaps partly because of Twitter’s takeover bid. 

Since then, which is when Musk first suspended and then withdrew the bid, it has risen 48 % until 21 September. It then fell again, returning in mid-October to the 2022 lows touched in late May. 

However as of Monday, i.e., from the time it was made clear that the Twitter purchase would be completed by the end of the week, it rose again by 12%. 

The current price level is in line with that of 7 October, when the outcome of the pending lawsuit was still uncertain. In the following days, it fell, in part because it looked as if Musk was about to lose the lawsuit, but it recovered when it became clear that Musk had finally been convinced to buy Twitter. 

Twitter’s stock on the stock market

Elon Musk’s proposed purchase price for all shares is $54.2. 

Yesterday, Twitter’s stock on the stock exchange closed at $53.3, which is a price perfectly in line with what Musk offered. 

Later in the year, however, it had also dropped to $31, although this was in February, that is, months before Musk made his takeover offer. 

However, on 11 July, when the purchase offer had in fact been withdrawn “for good,” the price returned to $32, but within a very few days, it had already risen to $39. 

On October 4, when it seemed clear that the court might agree with the shareholders, it made a single daily jump of 20% returning to $51. 

Right now Twitter’s share price is 24% higher than it was at the beginning of the year, making it one of the very few gaining tech stocks in this heavy bear market year. 

Many analysts argue that the $54.2 per share paid by Musk is an excessive price, but it should be remembered that it is a price in line with that of October 2021, and December 2020. 

Certainly, it is much higher than the $38 touched before the start of the pandemic, but this is also true for many other similar tech stocks. 

Alphabet (formerly Google), for example, is currently priced 23% higher than pre-pandemic, not that far from Twitter’s +36%. Meta (formerly Facebook), on the other hand, is priced below the low peak touched during the March 2020 financial market crash, when the pandemic broke out. So it seems that it cannot be taken as a benchmark. 

Twitter’s future in the hands of Elon Musk

One thing that is certain is that if Twitter now wants to survive, it must change. 

However, help in this regard could paradoxically come from Facebook itself. 

Meta, which is the company that owns the social network Facebook, seems to be in crisis, so much so that it has literally collapsed on the stock market. The social network Facebook, i.e. the world’s largest social network in the West based on written posts, does not seem to be doing particularly well. 

For Twitter, this could be an opportunity, since it is the second largest social network in the Western world among those based on textual posts. 

Should it be able to intercept many of the users fleeing Facebook it could grow a lot, not least because for this type of user there are not many other alternatives. 

Certainly video-based social media, such as TikTok or Instagram, now hold sway, but the fact that Facebook has nevertheless maintained a very large user base in recent years suggests that there may still be a future for text-based posts. 

In addition, Elon Musk is in fact a supporter of the crypto world, so more integration of Twitter with cryptocurrencies is expected. It is no coincidence that the price of Dogecoin has been rising in recent days, as this seems to be Elon Musk’s favorite cryptocurrency.