The battle royale: A quick recap

Here’s a timeline of events. If you don’t know who this Musk guy is or why he matters, we suggest checking out this TIME profile: 

• It all started on April 4 when Musk revealed that he owns 9.2% of Twitter—making him the largest shareholder. 
• The revelation came a little late in the day since US regulations require investors to reveal any stake larger than 5% in a publicly traded company within 10 days. And Musk is being sued over dragging his feet—but that is a separate kahani. 
• Twitter took the whole thing on the chin and offered Musk a board seat—which would bind him to a “standstill agreement” preventing him from expanding his stake in the company beyond 14.9%.
• Musk turned the board seat down—and instead made a “final offer” to purchase Twitter outright at $54.20 a share—38% higher than Twitter’s April 1 price. The total price tag: $43 billion.
• Cue the ‘poison pill’.

The poison pill defence: That’s the colourful name for Twitter’s strategy to prevent Musk from buying up stock in the open market—and taking control of the company. What it does: flood the market with freshly issued shares—and offer it at a lower price to shareholders other than the potential acquirer (i.e. Musk). This dilutes the ownership stake of the person attempting a takeover, and makes it very expensive to take control of the company. As The Guardian points out:

“Under the ‘poison pill’ plan, Musk would have to spend an increasing amount of money to maintain a majority stake in the company. In theory, the hostile investor’s cash would eventually run out, but this may be more complicated in practice when contending with the richest man in the world. Musk is worth around $260 billion.”

The new plan is set to expire on April 14, 2023—and will only kick in if any person or group acquires at least 15% of Twitter’s common stock without the board’s approval. 

An added plot twist: Another Twitter investor—the Vanguard Group—announced that as of April 8 it is the largest shareholder—with a 10.3% stake.

What Parag Agrawal is saying: The recently appointed CEO told employees the company was not being “held hostage” by news of Musk’s offer—and that “Twitter stands for way more than one human, any human.” None of which sounds like the company is interested in selling to Musk. 

What Jack Dorsey is saying: At first, Agrawal’s predecessor and Twitter founder Jack Dorsey only had this bit of biz school philosophy to offer: “as a public company, twitter has always been ‘for sale.’ that's the real issue.” But as Musk began to attack the Twitter board as being out of touch, Dorsey surprisingly lent an assist, calling it “consistently the dysfunction of the company”—and saying that a badly run board “can literally make a billion dollars in value disappear.” File that under ‘things that make you go hmmm’.

Why is Musk so obsessed with Twitter?

There are many theories—mostly unflattering—as to what Musk wants and why. But let’s start with his explanation.

Musk’s explanation: In his stock exchange filing declaring his offer, Musk declared: “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.”

On Thursday, at a TED event, Musk also made it clear that this wasn’t about making a buck:

“This isn't a way to make money. My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. I don't care about the economics at all.”

Point to note: In Twitter owned by Musk, the right to free speech would be near-inviolable, as he explained at the event:

“Is someone you don't like allowed to say something you don't like? If that is the case, then we have free speech. It's damn annoying, but that is the sign of a healthy, functioning free speech situation… If it's a grey area, I would say let the tweet exist… I do think we want to be very reluctant to delete things, and just be very cautious with permanent bans—timeouts, I think, are better.”

Musk has also previously described himself as a “free speech absolutist.”

Theory #1: Power and influence. Vox argues that Musk’s obsession with free speech is really about being able to make the rules about what he and others can say—on a powerful social media platform: 

“For politicians, business leaders, celebrities, and journalists, Twitter is a key platform for amplifying their messages and controlling their own narratives. Musk’s focus on Twitter, and his efforts to influence how it functions and moderates its users, underscore just how important the company is to public discourse—irrespective of how much profit it makes—and raises questions about who should be able to control a company that holds so much power.”

Point to note: While filing his offer with the SEC, Musk signalled that Twitter needs to become a private company—and not be publicly traded on the stock market—in order “to go through the changes that need to be made.” So if he took Twitter private, Musk would no longer be answerable to shareholders—and his power to make those “changes” would be exponentially more enormous.

Theory #2: Ego. $43 billion isn’t a lot of money for Musk—though he may not have it lying around to spend at will. But some think he is exactly the kind of guy to blow that kind of cash for social clout:

“Musk has long used Twitter to build his brand and communicate with his more than 80 million followers, and troll those he views as his detractors. In that context, his offer would be in keeping with a long history of wealthy individuals buying up media properties as a way to prop up their image. ‘Elon Musk’s offer to buy Twitter is a desperate attempt for Musk to garner attention,’ David Trainer, CEO of research firm New Constructs, said in an investment note Thursday. ‘He is only offering to buy Twitter because Twitter is the place where Musk is most popular.’”

Theory #3: It’s a pump-and-dump play. Translation: Musk is pushing up the price of Twitter so he can sell his stake and walk away. That’s what Wall Street seems to suspect—and why the company’s stock dipped slightly since his public offer. According to one expert:

“If I had to guess, I would say that he’s making an unfunded, highly speculative offer, that the board will reject, in order to give himself cover for selling off his stake, now that his board seat gambit has flamed out.”

Point to note: This isn’t an unreasonable view of Musk’s melodrama. Over the weekend, a US judge ruled that his 2018 tweets—which claimed he had secured financing to take Tesla private—were “false and misleading.” Yes, he is being sued by investors on that front, as well. Also: Musk was widely suspected of pumping and dumping the crypto currency Doge coin in 2021. 

But, but, but: Matt Levine in Bloomberg News points out that most of Musk’s antics have never been about money:

“He has amply demonstrated his ability to manipulate the price of many financial assets—Tesla stock, Bitcoin, Dogecoin, Twitter stock, whatever—but I do not think he has ever used that ability to make a quick buck. If he comes away from this escapade with an extra, like, $500 million and no Twitter, what does that accomplish for him?”

Is Musk good or bad for Twitter?

The upside: There is no doubt that the company has under-performed for years—especially compared to other big tech platforms, leading some to call it “a second-rate social network chasing Facebook.” And a Musk may be the wake-up call it needs to make some serious changes. 

Plus, there are many conservatives and tech leaders who are angry at the power social media platforms have to censor speech. Closer to home, liberals have been increasingly unhappy with Twitter’s willingness to toe the government’s line—often pulling down its critics’ tweets and accounts (though Twitter India’s policies may not change under Musk since he’s flagged the importance of following local laws).

The downside: There are two main concerns about a Musk-owned Twitter. One, his ‘absolutist’ view of free speech means a hands-off approach toward extremist speech—which can’t be good news for anyone concerned about hateful content on social media. Two, that kind of policy is also unattractive to advertisers. But Musk doesn’t seem as invested in ad revenues—or even making money off Twitter. None of which bodes well for the financial health of the company. 

Point to note: Several right-leaning social media platforms like Gab and Parler adopted a no-holds-barred content policy—to become an alternative to Twitter. But they were shut down by their service providers because these platforms were soon used to plan crimes—including a synagogue shooting and the US Capitol Hill riots. So Musk’s free speech approach may run into similar problems.

So what happens next? 

One: As Bloomberg News notes, while Musk may be a very wealthy man, it is not clear how he plans to buy Twitter without liquidating precious assets—like his Tesla shares. And it isn’t clear he has the appetite to make that kind of effort:

“You can patch these things together—some Tesla margin borrowing, some Tesla sales, some Twitter leverage, some equity partners, etc.—and probably get to $40 billion, but the financing seems tricky. And when he was asked directly about it in public, Musk did not exactly try to reassure anyone; he didn’t say he had financing, and he did say ‘I am not sure that I will actually be able to acquire it.’”

And legal experts point out his filing with the SEC is suspiciously vague and incomplete. So Musk may just do nothing—and it will all have been one big prank. 

Two: The Twitter board is considering Musk’s offer—and will only put it to the shareholders if it is approved. Most industry-watchers consider it unlikely. Musk is already making threatening noises about a possible rejection: “If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty. The liability they would thereby assume would be titanic in scale.” But that may be just Elon-esque bluster—or not.

Three: Other buyers jump into the fray—swooping in like a ‘white knight’ to save Twitter. A technology-focused fund Thoma Bravo has announced it is exploring a possible bid. So Twitter may be sold, just not to Musk:

“Arguably what has happened here is that Musk has put Twitter in play, that after his bid it has to be sold, but not to him. I don’t know to whom… given that Twitter is just as big and hard to finance for anyone else as it is for Musk. The obvious answer is another big cash-rich tech company, but that raises other problems. Mark Cuban tweeted that ‘every major tech company, Google, [Meta], et al. is on the phone with their antitrust lawyers asking if they can buy Twitter and get it approved. And Twitter is on the phone with their lawyers asking which can be their white knight.’”

Four: Musk does the pump-and-dump and sells all or a great part of his stock. He spells this out clearly in his offer letter:

“My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder… If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder. This is not a threat, it's simply not a good investment without the changes that need to be made.”

The bottomline: In the end, whether Musk buys Twitter or not, he will be just fine. But none of the outcomes are any good for the company—neither being owned by Musk, or desperately finding a buyer to fend off Musk—or watching its stock price tank as it tries to survive Musk and angry shareholders.

Reading list

Vox explains one big reason why Musk wants to buy Twitter. Yahoo News has a good report on why legal experts are sceptical about the bid. Matt Levine in Bloomberg News has the best analysis of Musk’s options moving forward. Reuters reports on potential suitors. Fox Business News checks Wall Street analysts’ view of the bid and Twitter. NBC News explains why he may drive away both users and advertisers. NPR looks at implications of his free speech views for the platform. Fast Company has a scathing take on a Musk-owned Twitter.