Elon Musk’s purchase of Twitter – What does it mean?

by May 2, 2022 0 comments

The billionaire CEO of Tesla Inc and perhaps the richest person in the world, Elon Musk has publicly announced his intention to buy out social media major Twitter Inc. The Twitter board has okayed Musk’s offer of $44 billion this month.

For months Musk and Twitter have been in the news for the parleys that were happening between them with regard to the purchase of Twitter. Now that the deal is pending, investors will look more closely at how Musk’s buyout of Twitter could affect their investments. The ramifications are particularly significant for Twitter shareholders and social media users.

Musk has long criticized Twitter for how it moderates content. When Musk first proposed buying Twitter this month, he said he initially invested in the service because of its potential as a global platform for free speech.

“However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form,” wrote Musk. “Twitter needs to be transformed as a private company,” he said.

When the acquisition is done and dusted, social media investors will find that Twitter will become a private company. So, there will be significantly less financial and operational transparency. Musk has also suggested that major changes to the user experience may be made too.

Twitter as a company is overall likely to change with this buyout. First, as a private entity, Twitter’s financial performance will no longer be as visible to outsiders. Second, as an owner of the company, Musk will have the latitude to carry out significant changes to the platform that may put pressure on other tech companies like Meta-owned Facebook and Apple Inc.

Changes to share price

Twitter shareholders will receive $54.20 in cash for each share of Twitter stock they hold. This means a cash influx for shareholders and especially for those holding a significant number of shares. Such shareholders will definitely earn more in cash.

Although Twitter’s board of directors has approved the sale and the company has entered into a concrete agreement to be acquired by an entity wholly owned by Musk, the deal is not complete. The question remaining is when the acquisition will be consummated.

Twitter shareholders must approve the deal at the company’s next annual meeting. And finally, the deal must get regulatory approval. Twitter said that it expects the deal to close sometime later in 2022.

For investors who don’t hold Twitter stock, the fact that the company is likely to go private could have a ripple impact on other social media companies. The way these companies use the Twitter platform can change drastically.

For Twitter Users

Musk has expressed his desire in adding an “edit” button that would allow users to go back and change tweets they have already posted. Musk has also expressed his desire to “make the algorithms open source”. Twitter users will need to submit additional information for verification too.

“Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it,” said Musk in a statement.

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