International Finance

Why is Elon Musk’s Twitter bid so controversial?

Elon Musk's Twitter bid so controversial
The billionaire's takeover of humankind's digital town square has polarised the internet.

Elon Musk, one of twitter’s most controversial users, plans to take over the platform. He brokered a deal for $44 billion to buy the company, a story that had everyone from the White House to Wall Street clamoring.

The billion-dollar buyout is so controversial because Musk declared himself a champion of free speech. A move favored by free speech enthusiasts and extremists and criticized by liberals and establishments. Many excluded from Twitter and mainstream media (the alt-right and other right-wing groups) welcome the move hoping to find a space on the platform. The Left believes that free speech often leads to hate speech, and a certain degree of censorship is crucial to maintaining stability.

Musk’s stand has been clear. The tech-billionaire once said, “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.”

Musk has been a vocal critic of the platform, demanding the app “prioritizes societal” imperative of free speech and rolls back content moderation. He joined Twitter in 2009 and has even expressed in a 2017 tweet that he wanted to purchase the platform. Elon has over 84 million followers on his account, with as many fans as there are critics.

Who is Elon Musk?
Elon Musk is a South-African business tycoon who developed, which the company that became Paypal later acquired. He is best known for being the CEO of The Boring Company, Space X, and, most importantly, Tesla. He is also the wealthiest man in the world. Many adore Elon because he peddles dreams like traveling to Mars, driving around in electric sports cars with zero emissions, connecting humanity to machines through chips with Neurolink, etc.

On the other hand, his critics like TechCrunch’s Taylor Hatmaker wrote that Musk generally doesn’t give a damn about the incomprehensible power differential between himself and everyone else. Elon has been skeptical about the vaccine and tweeted that COVID-19 was ‘dumb.’ There are accusations on his companies of racism, poor working conditions, union-busting, and covering up worker accidents.

Why does the tech billionaire want to take over Twitter?
Musk has been trying to exert his influence on Twitter for quite some time now. In April, he bought 9.2% of Twitter shares but backed out of his planned board seat at the last moment and decided to buy the whole company and privatize it. His bid was $43.4 billion, around $54.20 per share for the entire company. He did this right before an interview with TED. On April 15th, the company, in a press release, said they were adopting a limited-duration shareholder rights plan to stop the tech entrepreneur from taking over.

Why has this news rattled Wall Street?
Elon Musk is a respected industrialist and CEO of Tesla, SpaceX, The Boring Company, and Neurolink. But his acquisition of Twitter has shock waves pulsing through Wall Street and social media.

Many believe that Musk is overpaying and Twitter isn’t worth as much as he thinks. Wedbush analyst Dan Ives said that $44 billion is a head-scratcher for a company that he thinks can’t be worth more than $30 or $35 billion. However, he added that if you are the world’s richest person, you can do something like that, and the move has had Twitter investors popping champagne.

Investors are worried about Musk’s attempt to change Twitter’s economic model, as he promised that he would not rely on advertisements for revenue. Simultaneously, activists are afraid of one man having Twitter’s colossal database at his disposal.

The deal is not complete and can still fall through. Musk is pledging shares in Tesla and SpaceX to buy Twitter, and the ongoing market volatility is slashing millions in market cap from big tech. It means that he might not have the resources to purchase twitter if the bear market continues. Musk said he was waiting for some clarity about the global number of fake Twitter accounts and accused Twitter of having a lot of bots (fake users) than the corporation would admit. He called Twitter’s bot numbers ‘very suspicious.’

On May 23rd, Musk tweeted a poop emoji at the Twitter CEO after Agarwal wrote a long thread on bots and the company’s efforts to control them. The next day, he said acquisition cannot progress until Twitter provides “proof of <5%.” Some say this is Elon’s strategy to drive down the agreed $54 per share takeover price as tech stocks, including Twitter, have lost so much value in the last few weeks. Others like Analyst Dan Ives of Wedbush Securities said that Musk has “cold feet” and the “bot issue is a scapegoat to get out of the Twitter deal.”

Elon’s delay in the Twitter acquisition had many investors worried, and Tesla stocks have plunged. The CEO took to Twitter to inform shareholders that the Twitter acquisition took only about 5% of the time and that Tesla is on his mind 24/7.

On May 20th, Musk was caught up in an alleged sex scandal, as he took the time to respond to a Business Insider Report that SpaceX paid a flight attendant $250,000 in severance over a sexual harassment claim against him. Twitter said it remained committed to its original deal with Musk and refrained from commenting on the scandal.

How are Twitter employees taking the news?
Twitter is said to have one of the best work environments, and it is the preferred place for millennial tech employees to work along with Netflix. Twitter’s 7,500-strong workforce is known to be progressive and politically sensitive. They are partly responsible for Trump’s ban on the platform contributing to his downfall in the 2020 elections. Many of them are either ready to leave or to fight their company.

Will the deal be successful?
On May 13, Elon put the $44 billion deal on “temporary hold” till he could ascertain whether bots make up fewer than 5% of the total user base. However, since Twitter has not been able to show Musk any proof or data about the number of fake users, he wrote to Twitter on June 6 that he reserves the right to terminate the deal. He accused Twitter of “resisting and thwarting” his requests for data on bots.

Twitter allegedly refused to provide the sought-after information, and Musk said that the social media giant’s lax testing methods are inadequate and that he was conducting a personal analysis.

The Tesla CEO also remarked that Twitter violated his information rights by withholding data. His legal counsel added that this is a material breach of Twitter’s obligation under the merger agreement. He also said Musk was entitled to withdraw from the transaction and cancel the merger agreement.

The SpaceX CEO sent the letter a week after Twitter claimed the HSR Act waiting period for the platform’s acquisition was over. The Hart-Scott-Rodino Antitrust Improvements Act, or HSR Act, demands that parties report large transactions to the US Department of Justice Antitrust Division and the Federal Trade Commission for review. Musk obtained funds by raising $13 billion through loans against Twitter and the rest through equity financing.

General Ken Paxton, Texas Attorney, launched a probe on Twitter bots after Musk’s allegations. His office said in a statement that the Attorney issued a Civil Investigative Demand (CID) to investigate whether Twitter’s reporting on the number of actual users was misleading or deceptive under the Texas Deceptive Trade Practices Act. He has demanded details on 23 items, including comprehensive data on daily and monthly monetizable active users. The Attorney General also requested the stats on the number of inauthentic users present each month from 2017 to date.

It was Donald Trump who endorsed Paxton for the position of Attorney General. Paxton was indicted seven years ago on securities fraud charges but has not stood on trial yet.

A securities law expert, Marc Fagel, said that it was unusual for one state to investigate a national, publicly-traded company in another State as it is usually the province of the SEC.

Fear in Washington
Democrats believe Former President Donald Trump was a threat to Democracy. He was banned permanently from big tech platforms ahead of the US elections. Arguably, his absence on social media contributed to his downfall, and his ban was to stop hate speech and crackdown on extremists.

Elon Musk has a different take on free speech and doesn’t believe in the idea of ‘reasonable restrictions’ on them. The free speech absolutions he has is scaring Democrats and the suits in the White House.

Musk said, “I don’t think it was not correct to ban Donald Trump; that was a mistake because it alienated a large part of the country and did not ultimately result in Donald Trump not having a voice.” Though this has rattled many on the Left, he is not entirely wrong. Donald Trump has made his app and free speech platform called Truth Social, which has promised to deliver an “engaging and censorship-free experience.”

It was trending on the App Store, but Google was not letting the former president list the product on Google Play Store. It has become a sort of echo chamber for the far-right in the US. When asked if he would return to Twitter, he said he would wait 6 hours after Truth Social posts before using any other platform. Some fear Trump’s victorious return due to the Twitter takeover.

Many Democrats like Rep. Alexandria Ocasio-Cortez anticipate an explosion of hate crimes following Musk’s Twitter policies. Sen. Elizabeth Warren called it “dangerous to our democracy.” Republicans like Ted Cruz dubbed it the “biggest development for free speech in decades,” and far-right politicians like Marjorie Taylor-Greene were ecstatic.

The Tesla CEO has polarized America and most of the world. Free speech, as an idea, has always benefitted the minority, whether it be an oppressed minority or an extremist minority.

There are two major camps of thought about the future of Twitter under Musk. One group believes it will be an era of hate speech, and Musk wouldn’t even follow through on his Free Speech promises. Twitter has banned many international activists fighting under authoritarian governments, and it is doubtful to some if Musk would reinstate those accounts.

The other camp believes that this is an end to political manipulation and censorship. That anyone anywhere can speak their mind without the fear of political backlash. They claimed that the era of a “rigged marketplace of ideas” is finally over, and this would attract new users to the platform.

Elon Musk, the enigma, does not belong to any camp. He has put himself in the middle of the political spectrum by labeling himself as “half Democrat and half Republican.” However, when asked about his relationship with the Republican Governor of Texas, Musk said he “prefers to stay out of politics.”

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