Elon Musk, the world’s richest person, has agreed a deal to buy Twitter for $44 billion.
The board of the social media giant accepted the offer from the Tesla and SpaceX magnate, who is thought to be worth $273.6bn, after initially turning it down.
The deal – expected to close this year – is being funded by a reported $21bn of his own equity with the remainder provided through financing from Morgan Stanley and other institutions.
Twitter has rarely turned a profit. On the back of $5bn revenue in 2021, it made a loss of $221m – figures which pale into comparison with rival Facebook’s $117bn revenue and $39bn profit.
“The price offered by Elon Musk took advantage of the current weakness in technology share prices,” said John Colley, Associate Dean of Warwick Business School, the former MD of a FTSE 100 company and an expert on mergers and acquisitions.
“Twitter was well down from its peak and the share price had halved over the last year. The premium that Musk offered must have been attractive to shareholders.
“However, $44bn seems a lot to pay for a hobby – even for Elon Musk. One wonders, how much of a plan he has to add value?
“Previous management have struggled to monetise the model and Twitter did not look like making any return until Donald Trump adopted it as his main channel for communicating with the public.
“The jury is still out on whether Twitter can really compete against Facebook, Google and TikTok.”
Musk himself has 83 million followers on Twitter and has often been embroiled in controversy over his posts, such as when he labelled British caver Vernon Unsworth a ‘pedo guy’ during the rescue of trapped Thai schoolboys. He ultimately won the defamation case brought by Unsworth.
Musk has called for changes to the platform. Twitter has faced increasing calls for crackdowns on extremist material, but he seems opposed to that view.
“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 said in a statement announcing the deal.
🚀💫♥️ Yesss!!! ♥️💫🚀 pic.twitter.com/0T9HzUHuh6
— Elon Musk (@elonmusk) April 25, 2022
The firm has a current market cap of $40bn. Its co-founder Jack Dorsey stepped down as CEO in November 2021, with former CTO Parag Agrawal taking the reins.
In his offer document, Musk told Twitter’s board: “I don’t have confidence in management.”
Agrawal tweeted following the sale: “Twitter has a purpose and relevance that impacts the entire world. Deeply proud of our teams and inspired by the work that has never been more important.”
In a meeting with the company’s employees, he added: “Once the deal closes, we don’t know which direction the platform will go.”
Musk has also called for the eradication of fake accounts. “I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans,” he said.
“Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”