Musk bought a new identity for $44 billion

The richest man in the world builds his own business map by buying and selling.

Article | “Chinese Entrepreneur” reporter Deng Shuanglin and Ren Yafei

Editor|Li Wei

Head image source|Visual China

A “Silicon Valley farce” that kept reversing finally ushered in the finale.

On October 28, Beijing time, Reuters quoted people familiar with the matter as saying that Tesla CEO Elon Musk has completed a transaction to take Twitter private for $44 billion.

On the morning of October 28, local time in the United States, Musk updated a tweet: “This bird is free.” The Twitter logo is a blue bird. At present, Musk has arrived at Twitter headquarters and updated his personal profile on social media to “Twitter boss.”

According to people familiar with the matter, Musk fired several Twitter executives just minutes after completing the deal. The executives who left Twitter headquarters that day included Twitter’s former CEO Parag Agrawal and CFO Ned Seeger. Er et al. In fact, more than 1,100 employees have left Twitter since Musk announced his intention to acquire Twitter in January, with nearly a third going to Google or Meta.

Source: Musk Twitter

In April of this year, Musk announced the acquisition of Twitter for a total price of $44 billion, or $54.20 per share. But soon after, Musk changed his mind and announced the termination of the acquisition on July 8, citing Twitter’s failure to disclose key information, intending to withdraw from the deal. After Musk tried to back out of the deal, Twitter sued Musk, demanding that he honor the agreement.

In early October, Musk again agreed to complete the Twitter acquisition on original terms, subject to the U.S. Court of Chancery for Delaware stopping the lawsuit immediately and postponing the trial and all other proceedings. Musk has notified co-investors who pledged to help him buy Twitter for $44 billion, according to people familiar with the matter.

The media has previously reported that Musk plans to lay off 75% of the company’s employees after acquiring Twitter, reducing the number of employees from about 7,500 to more than 2,000. Many Twitter employees were upset by this. But the latest news is that Musk told Twitter employees that he would not lay off 75% of his workforce.

In 1995, Musk, who was only 24 years old, decided to drop out and start his own business on the second day of studying for a doctorate at Stanford University, and founded Zip2 with his younger brother. In the past 27 years, he has experienced the brink of bankruptcy of his two companies, and sold assets such as McLaren sports cars when the financial tsunami swept the United States, and then he has built his own business empire.

This time, through the acquisition of Twitter, Musk’s business map has filled the media shortcomings, spanning fields such as aerospace, transportation, artificial intelligence, medical research, and media, and Musk’s ambitions for the future universe have gradually become clear.

Musk takes over Twitter

“Walk into Twitter HQ.”

On October 26, local time, Musk posted a video on Twitter in which he couldn’t hide his excitement and walked into Twitter’s headquarters building holding a sink.

A day later, Musk couldn’t wait to change his profile on his Twitter account to “Chief Twit” (Twitter boss) to celebrate in advance that he finally took charge of the company.

Musk, who is very active on Twitter, has his ideas and ambitions for social media, and he has tried to implement these ideas into the Twitter operation after the change of ownership. Since the first day that the rumor of the acquisition was released in April, Musk has repeatedly emphasized the two issues he cares most about Twitter on different occasions: one is the scale of speech, and the other is “bot information” (BotInfo).

This obsession further prompted him to continue to advance the acquisition process of Twitter.

So here comes the question: what happened between Musk and Twitter in the past six months?

Looking back at the “acquisition of the century”, which has frequently occurred in farce, in the past six months, Musk’s acquisition of Twitter has gone through from finalizing the transaction to backtracking, being “threatened” by Twitter, to the court case, to resuming the transaction and finally Multiple reversals of successful acquisitions.

In early April, Musk acquired a 9.2% stake in Twitter for $2.64 billion, becoming the company’s largest shareholder. Soon after, he proposed to buy Twitter for $43 billion, saying he would change many of Twitter’s rules, in what was seen as a hostile takeover plan.

On April 15, Twitter’s board of directors urgently announced the launch of a “poison pill plan” to allow shareholders to buy additional shares in a hostile takeover to counter Musk’s takeover. But from the perspective of subsequent progress, the “poison pill plan” did not prevent Musk from acquiring Twitter, but pushed the buyer and the seller to the negotiating table.

On April 26, Twitter reached an agreement with Musk. Musk will buy Twitter for $44 billion in cash. However, this merger agreement has not been implemented for a long time, and the issue of fake accounts has become the biggest point of contention between the two parties.

On May 13, Musk publicly repented, accusing Twitter of concealing the number of fake accounts, and decided to suspend the acquisition. After more than a month of pulling, on July 8, Musk suddenly and officially announced the termination of the merger, citing Twitter’s serious violation of many terms in the agreement. Musk said Twitter had not “complied with its contractual obligations.”

On July 12, Twitter formally sued Musk over the acquisition, urging him to complete the acquisition at $54.20 per share. In the weeks since, lawyers from both sides have issued numerous subpoenas to the other to tease out testimony and evidence in preparation for the Oct. 27 trial.

However, less than two weeks before the acquisition trial, Musk repented again in early October and re-proposed to buy Twitter at the original price. On October 6, the Delaware Court of Chancery judge announced that the trial of the case was suspended, requiring Musk to complete the acquisition transaction before 17:00 on October 28, otherwise the trial will be reopened in November.

Almost on the last day of the court-imposed deadline, Musk closed the long-running deal of the century.

On October 27, local time, Twitter’s stock price rose 0.66%, reaching a maximum of $54 on the day, a new intraday high since April 5. As of the close, Twitter’s stock price closed at $53.7, with a market value of $41.029 billion. Since October 4, Twitter’s market value has risen by more than 4.5%.

Twitter is scarred

Although Musk eventually won Twitter, the six-month acquisition and legal proceedings have left Twitter scarred. Currently, Twitter is facing severe employee turnover, slowing hiring and stalled projects.

As early as August this year, there were media reports that Twitter warned employees that their year-end bonuses may be cut in half due to the uncertainty caused by the economic downturn.

Twitter employees’ year-end bonuses are half based on company performance and half linked to individual performance. Judging from the second quarter financial report, Twitter’s performance is indeed worrying: the financial report shows that Twitter’s revenue in the second quarter was US$1.17 billion, which was lower than market expectations, down 1% year-on-year, the first year-on-year decline since the second quarter of 2020; net Loss of $270 million, or $35 per share.

Twitter explained in its earnings report that due to the impact of the macroeconomic environment, headwinds in the advertising industry, and the great uncertainty brought about by Musk’s acquisition, the results in the second quarter were unsatisfactory.

In 2021, Twitter’s revenue increased from $3.72 billion in the previous year to $5.08 billion, while losses narrowed, from -$1.14 billion to -221 million.

In fact, over the years, Twitter has faced a formidable challenge in improving its profitability. One of the reasons is that Twitter’s user growth has not been ideal.

Source: Visual China

Facebook was only two years ahead of Twitter, but its users have soared to 1.9 billion, compared to Twitter’s 230 million, surpassed by latecomer TikTok. Research firm eMarketer estimates that Twitter will account for just 0.9 percent of global digital ad revenue this year, while Facebook and its Instagram unit will account for 21.5 percent, and TikTok will have a 1.9 percent share.

The advertising market is vulnerable to a weakening global economy, and Twitter, which generates 90% of its revenue from advertising, is looking to diversify its revenue streams. Musk also wants Twitter to shift from relying on ad revenue to a paid subscription service.

Twitter’s products also need to innovate. Facebook’s features have been iterating, catching up with the latest trends in social media with acquisitions, but Twitter’s features remain the same as when they first launched. It had acquired the short video app Vine in 2012, but Vine was eventually shut down in 2016 due to poor management.

Taking into account Musk’s previous success in investing in PayPal and Tesla, it is very likely that Twitter’s current status quo will be improved, which is a key reason for Twitter’s former CEO and co-founder Jack Dorsey to support Musk. .

In the past few months, Twitter has made a series of adjustments in response to the deteriorating economic environment. In May, Twitter announced it was suspending most hiring, keeping only business-critical roles open, and cutting spending on things like contractor spending, marketing and real estate.

At the same time, Twitter has experienced frequent high-level personnel changes. Former VP of product management Ilya Brown, former VP of services Katrina Lane and former head of data science Max Schmeiser have all left. Before that, former consumer chief Kayvon Beykpour and former revenue product chief Bruce Falck also left the company.

In July, Twitter laid off a third of its talent acquisition team, citing growing pressure on its business and uncertainty surrounding Musk’s acquisition.

Musk has said that he will lay off 900 employees after the acquisition of Twitter, because Twitter’s financial level is not healthy now. Based on Musk’s harsh style, some Twitter employees were very worried and left messages to ask Twitter’s then-CEO Parag Agrawal whether large-scale layoffs would take place. Twitter said in a July 13 regulatory filing that there are currently no company-wide layoffs, but may continue to restructure its business.

It was not until October 26, local time, that Musk appeared at the Twitter headquarters and spoke to the company’s employees. The rumors that “we will lay off 75% of Twitter’s workforce” were finally denied.

Musk is talking to employees in a coffee shop at Twitter’s headquarters. Source: Twitter

Turning such a huge social media company into a profit, however, is no easy task, and the acquisition and lawsuits are already taking their toll on Twitter. Dan Ives, a financial analyst at Wedbush Securities, said: ” It’s easy for Musk to buy Twitter, but the hard part is fixing it. Turning that around will be a tough challenge.”

Musk’s business map

This acquisition of Twitter is Musk’s usual method. The richest man in the world built his own business map by buying and selling.

In 1983, 12-year-old Musk successfully designed a space game software called “Blastar”, which was later resold for $500, earning the first pot of gold in his life. In 1995, the 24-year-old Musk entered Stanford University to study for a doctorate in physics, but decided to drop out and founded Zip2 on the second day after admission. Four years later, at the height of the Internet bubble, Zip2 was sold by Compaq for 340 million In the US dollar acquisition, Musk took a 7% stake in the company and got $22 million.

With the money from selling Zip2, Musk started, an online bank payment. The following year, and Confinity merged and were renamed PayPal. Two years later, eBay bought PayPal for $1.5 billion. Musk has an 11.7% stake in PayPal, making $165 million as a result.

Musk, who has become a billionaire, has not been idle either. He used the money to do several big things – in 2002, he established SpaceX, a space exploration technology company, in 2004, he invested in Tesla, and in 2006, he invested $10 million in photovoltaics. Power generation company Solar City. So far, Musk’s business goal of “Sea of ​​Stars” has begun to take shape.

It is worth mentioning that Musk’s investment in Tesla is exactly the same as his investment in Twitter.

The founders of Tesla were Martin Eberhard and Mark Tarpenning. In 2004, Musk invested $6.3 million in Tesla, when Tesla’s Series A funding totaled only $7.5 million. Musk is undoubtedly Tesla’s chairman and largest shareholder. Three years later, Musk personally stepped down, ousted the Tesla founder, and turned himself into a CEO and product architect.

In addition to Tesla, SpaceX, and Solar City, in 2016, Musk founded Neuralink, a brain-computer interface company, and the Boring Company, an underground tunnel company, in the same year. There is also the non-profit organization OpenAI.

After the acquisition of Twitter fell, Musk’s business empire has included space, transportation, artificial intelligence, medical research, media and other fields, and Musk’s ambitions for the future universe have gradually become clear.

Musk and his business landscape. Source: “Time”

How will Twitter change in the age of Musk?

Musk once said in a conversation, “We don’t have a powerful application like WeChat, the Chinese can do a lot of things with WeChat, and there is no such powerful application outside of China, ‘ Buy Push Special, copy WeChat’.

It can be seen that China’s Internet products are deeply concerned and loved by Musk. Some netizens joked that whether Musk will acquire Douyin next? After all, in Musk’s territory, there is still a part of entertainment that has not been filled.

Musk has indeed expressed his covetousness for TikTok on many occasions – a few months ago, Musk publicly praised that TikTok’s algorithm is not boring, saying that “Twitter can be shaped in the same way to make it interesting.”


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