Musk officially takes over, will Twitter become a “free hell”?

Twitter’s official surname is “Ma”.

On October 28th, Beijing time (on the evening of October 27th, Eastern Time), Bloomberg reported that Musk has officially completed the $44 billion acquisition of Twitter.

Twitter CEO Parag Agrawal and CFO Ned Segal have left their San Francisco headquarters, according to sources.

Over the past week, Musk has been scrambling for a final takeover to complete the deal by an Oct. 28 deadline set by a Delaware court. In addition, he has also done “warm-up” in various ways – including changing his Twitter profile to “Chief Twit”, and holding a sink to the San Francisco headquarters office to “scatter morality”.

The morning after the acquisition was completed, Musk also tweeted a “letter to Twitter advertisers”, in which he explained his motivation for buying Twitter: “I’m not doing this to make a lot of money, I do this to help the people I love.”

Today, Musk stepped up to take over Twitter and became the company’s new boss.

and then?

A

Banks, institutions, and individuals paid for Musk’s $44 billion deal, and even Musk himself sold a lot of Tesla shares. After the transaction is completed, the impact of this huge financing will continue.

In April, Musk announced that he had raised $46.5 billion for the deal, including two debt commitments from banks including Morgan Stanley and other unnamed financial institutions (one for $13 billion and the other for $13 billion). $12.5 billion, which later fell to $6.25 billion).

Musk himself pledged about $21 billion in equity to fund the deal, followed by another $7 billion from investors including Oracle founder Larry Ellison’s cryptocurrency firm Binance ‘s equity.

After half a year of tugging between Musk and Twitter, it is not clear who will withdraw and who will join in the final financing. What is certain is that banks have fulfilled their commitments – Morgan Stanley, Bank of America and Barclays, etc. Seven banks have reportedly prepared $13 billion in borrowings, including $6.5 billion in leveraged loans and $6 billion in junk debt, plus $500 million in special-type loans.

According to a report by the US media Business Insider, in April Musk announced that he would acquire Twitter, and all parties were interested, especially Wall Street. The reason is not Twitter, but Musk himself. He owns Tesla with a market value of $700 billion and is actively involved in capital markets. He also owns SpaceX, which was valued at $100 billion last year and could go public in the future. Even The Boring Company, regarded by outsiders as Musk’s least successful company, is worth more than $5 billion.

“Everyone wants to do business with Musk,” said Stephen Biggar, director of financial research at Argus Research. “In order to get the next deal, they (banks) may have to take losses on some previous financing commitments that could be profitable, like the next deal, or if he (Musk) takes Twitter private and then re-launches listed.”

When Musk “demonstrated” a few months later to acquire Twitter again, for the bank, the deal itself was even more risky. Not only has Twitter’s business deteriorated further, but Musk’s untested vision for Twitter could alienate advertisers, affecting the company’s future revenue.

What’s more, as with any large acquisition, banks will sell debt to get out of their books. But investors have lost interest in riskier debt such as leveraged loans, which have been affected by rapid global interest rate hikes, recession fears and market volatility from Russia’s invasion of Ukraine.

Now the $44 billion deal — the same amount Musk proposed in April — could cost a lot more. But even if the bank wants to withdraw at this time, it is difficult to go back because of the lack of legal basis for withdrawal (Musk can even initiate a lawsuit).

Musk pledged to help the bank sell the debt after the deal closes, the people said. In a normal acquisition transaction, the bank, the buyer and the company’s management would come together on a conference call with investors, sell debt and pitch the business. But the original debt commitment stipulated that Musk’s side would only provide assistance for a maximum of 30 days after the deal closed, and to participate in a maximum of two hours of investor meetings.

In other words, the deal has cost at least seven banks, and will continue to deal with the debt in the future, while Musk will temporarily become a “salesman” to help them sell the debt.

On the other hand, the boss wanted to buy a new company, and Tesla was shot.

Musk himself has been selling Tesla stock for a known $15 billion this year for the deal — $8.5 billion in April and another $6.9 billion in August. Tesla’s stock price fell about 40%, and its market value fell by $100 billion.

In order to complete the acquisition, Musk may be forced to sell $5 billion to $10 billion in Tesla shares in recent days, analysts at Wedbush, an American investment bank, said in a new report at the end of October.

It is foreseeable that after the completion of the transaction, the correlation between the stock prices of the two companies will increase significantly, intertwined and influence each other.

B

Whether for Musk himself or the “financiers” behind the deal, the next question is: Can Twitter get better?

And this “good” needs to be viewed from two perspectives, one is whether Twitter’s business performance as a company will be better, and the other is whether Twitter will be more “beautiful” as a social media product.

Musk has never had a clear plan for Twitter’s management and product direction, but he certainly wants to change Twitter.

One of the things that Musk has repeatedly emphasized is “freedom of speech”. Musk will reconsider Twitter’s approach to content moderation, as well as some permanent bans from the platform, which will directly change the Twitter product. He has also spoken about his desire to weed out robo-accounts, and the debate with Twitter over the past few months has largely revolved around robo-accounts.

Twitter has managed the content of the platform for many years before, not only marking some extreme or wrong information with warning signs or directly hiding it, but also banning some accounts. For example, in 2020, Twitter imposed restrictions on news related to the US election, and “misleading or controversial information” was strictly investigated. If tweets were tagged as “misinformation,” users had to click “view” to see the content. Content that is warned or hidden by the platform also cannot be retweeted, liked or commented on.

If Musk is really moving toward a “freer” vision, what may soon change is that some accounts that have been banned from Twitter in the past will be “revived.” That includes former US President Donald Trump, which could be a huge advantage if Trump decides to run for the White House again in 2024. In addition, Musk’s friend and music star “Kanye West” (Kanye West), who has been banned from Twitter many times for anti-Semitic remarks, also lost his cooperation with Adidas “coconut shoes” series.

Musk feels that Twitter is “managing too much”, but can “managing less” really make Twitter more “beautiful” as a product?

There is much concern about Musk’s idea of ​​letting go of the Twitter environment. Some “lesser” platforms such as Parler, Gab, and TruthSocial (Trump’s social app) have unmatched user numbers and are full of hate speech, threats and violent content. Some people share on these platforms and others. Harmful information prohibited by the platform.

“Obviously there’s going to be a lot of hate speech and hostility. Will that in itself drive users away? Or is there enough critical mass to sustain the platform?” Andy Wu, a professor of business strategy at Harvard Business School, told NPR Radio NPR expressed concern.

Speaking of the final product form, Musk has taken a fancy to China’s WeChat and is interested in building a super app (Everything App), which is “X” in Musk’s words. And Twitter’s role, according to Musk, is “an accelerator to create X.”

He believes an important goal of Twitter is to get people “basically living on it.”

But this will be a huge challenge. In building a super app, Twitter has no time advantage at all. TikTok, WhatsApp, Facebook and other products are trying to evolve in this direction. Moreover, in the field of payment, Twitter does not have the first-mover advantage of mobile payment like WeChat in the past. The United States already has Apple Pay, Google Pay, PayPal and so on.

In terms of business model, Musk said in a report to investors in May that he plans to reduce Twitter’s advertising revenue dependence by about half in the future, that is, from about 90% in 2020 to 45%. In addition, it is also developing the payment business, which plans to generate $15 million in revenue from the payment business by 2023, growing to $1.3 billion by 2028. In public, Musk has said he doesn’t care about profitability.

It may be because of Musk’s fragmented speeches in the past few months that people have formed the impression that Musk’s Twitter will become a social app that “can say anything” and a cool company that does not rely on advertising. Only to scare off users and advertisers, Musk made the announcement on the eve of the Twitter acquisition.

On the evening of October 27th, Beijing time, Musk released “A Letter to the Advertiser of Twitter” on Twitter , a total of three plain text pictures, which is quite serious for Musk, who is laughing and scolding when he sees the sky, which shows his seriousness ( Or hope that the outside world will believe that he is serious).

In the statement, Musk made two denials: it’s not about making Twitter a “hell of freedom for everyone” and the ads are not completely unimportant, it’s the future of Twitter that the outside world cares about.

First, Musk said that Twitter “obviously can’t be a free hell for everyone, reckless about what they want to say and say”, but “warm and welcoming to everyone.”

Second, Musk affirmed the importance of advertising, saying that low-relevance ads are spam ads, but high-relevance ads are actually content, and if done correctly, can make people happy, entertaining, and informative. “Fundamentally, Twitter aspires to be the most respected advertising platform in the world, strengthening your brand and growing your business.”

But like all previous “plans”, Musk’s Twitter vision expressed this time is still lacking in details.

To be more “enthusiastic” without becoming “hell”, how to achieve a balance between content management and freedom of speech? How to make “everyone” feel “popular” while avoiding the erosion of the platform by harmful content (after all, “everyone” naturally includes people who believe or even deliberately create harmful information)? By what standard is an ad “garbage” or not?

None of these are answered yet.

C

In fact, in addition to the “Note to Twitter Advertisers”, Musk may still need a statement to employees.

7,500 employees are in the midst of a huge amount of uncertainty at a time when people are eagerly talking about the future of Twitter, the product and the company. Musk took over and the company entered a reorganization, which means that Twitter may change from corporate culture, workplace culture to employee work content and even the job position itself.

Just recently, it was reported that an open letter was being circulated inside Twitter, the content of the letter was a protest against the rumored “75% layoff” of Musk, and it was called “an obvious intimidation of employees.”

The rumor of “75% layoffs” came from the “Washington Post” report, and Twitter has since refuted the rumor. When Musk took the sink to Twitter’s San Francisco office, he also told employees that he would not lay off 75% of the workforce.

But it’s hard to say how much comfort this has for employees who have been in the fog for half a year. In the past six months, there have been many rumors that Musk will carry out large-scale layoffs.

What’s more, Musk’s previous appeasement to employees sounded conditional: In June of this year, Musk held a meeting with all Twitter employees as a future boss, at which Musk said “don’t worry about layoffs”: (emphasis) As long as you are good enough, these are not problems.

The concerns of employees have already appeared on the bright side. Recently, the US website Punks & Pinstripes statistics show that in the past 90 days, more than 500 employees have left Twitter, and these people are becoming Google, Apple, Amazon and Meta and other technologies A target for giants to compete for.

Musk said “good enough is fine,” but the problem is that not all good enough people want to work for Musk.

As an “Internet celebrity”, Musk is approachable, humorous and lively, but as a boss, he is a cold wind in winter and a fire in summer. He will go directly to the front line of business, and the book “Silicon Valley Iron Man” describes him as “high-profile, and will patrol around with the air of authority.” He will give his subordinates a hugely challenging death order, such as requiring a Tesla sales team to more than double the number of car pickups in the region the next day (or leave). He will also react quickly to achieve his goals. For example, in May 2020, Musk asked SpaceX employees why they couldn’t build rockets 24 hours a day, 7 days a week. It recruited 252 employees, doubling the manpower of the factory.

Musk has also been “decisive” when it comes to firing employees. An intriguing old story is that an assistant who worked for Musk for 12 years offered to raise her salary. Musk gave her a few weeks off, and then found that she could do without her, and fired her.

It’s completely different from Twitter’s workplace culture. Twitter’s workplace culture in the past was relatively relaxed. It was a company that emphasized “life-work balance” and even formed its own “friendly culture.”

In Silicon Valley, Twitter was the first company to allow employees to work remotely permanently, with a quarter of its current workforce permanently working remotely. The company has also designed a “focus week,” in which employees can take a Monday off Monday and have no non-essential meetings during the week to focus on the project at hand.

Buddhist employees, encountering a wolf-like boss, are really unlikely to play a “Happy Concerto”. What’s more, the boss may also carry out drastic reforms to the company’s business, which will directly affect the work of employees.

Twitter’s security team, which has been in place since 2008, has grown to hundreds of employees who are directly responsible for Twitter’s content moderation. Under Musk’s vision of “everyone is welcome”, can these employees work? keep? What will happen to the work content?

These are still unanswered.

When Musk came to Twitter’s office with a smile on his face, not all employees had smiles on their faces, and sharp-eyed netizens found one after another “disappointed” faces from the live pictures. .

Musk is not only the top 3 top celebrity on Twitter, but also the new boss of this company. His vision is big, and his plans are vague. What he can make Twitter become can only be done. Just wait and see.

In his latest “Note to Twitter Advertisers,” he said: “I know that even with my best efforts, failure is still possible.”

References:

1. IT House: “Will Musk cut off Twitter’s advertising revenue, the world’s largest advertising group doesn’t think so”

2. Wall Street News: “Revenue fivefold in six years, advertising dependence halved: Musk draws a “grand” blueprint for Twitter”

3. Yicai: “Musk wants to turn Twitter into WeChat, but it may be difficult for him to succeed”

4. Daily Economic News: “$13 billion in financing is about to be in place, Musk said to complete the acquisition of Twitter by Friday”

5. Financial Associated Press: “Twitter Trading “Blood Loss”! Wedbush: Musk may sell $10 billion in Tesla shares this week

6. Zhitong Finance: “Many banks led by Morgan Stanley may face a loss of US$500 million due to the Twitter acquisition”

7. The Paper: “The acquisition is imminent! Musk appeared at Twitter headquarters with a washbasin and said he would not lay off 75% of employees