Elon's REAL Twitter Strategy

Elon Musk just took control of Twitter. But not for the reason you might think. See, Elon started secretly buying Twitter shares back in January, and in just two months, he'd accumulated more than 5% of the company. That alone wasn't enough to do much with, so he kept building the position. On April 4, Elon's big move hit the press. He owned nearly 10% of the company, but SEC filings showed that he would be a passive investor and not try and make any changes to the company. That clearly wasn't going to happen, though. Elon had already been tweeting constantly about how to change the service. Clearly the pressure was on at Twitter hq. So by the end of the day, they had publicly invited him to join the board of directors. A board seat would give Elon real control over how things get done. But here's where it gets weird. If you look in the Wayback Machine, Elon was actually added to Twitter's website a full four days earlier. So there was clearly more going on here than meets the eye. Getting a board seat is normally a key step in changing the trajectory of a company. The board picks the CEO and sets the high level strategy. But Twitter's board structure is designed to prevent takeovers, and Elon was thinking two steps ahead. Twitter's now in a very public fight with its biggest shareholder, who is also the richest man in the world. So Elon declined the board seat and set in motion a plan that would solidify his control over Twitter once and for all. So he's making an offer to buy. Yes, he is making an offer to buy Twitter. You made an offer to buy Twitter? Why? In order to understand Elon's plan, we have to dive into his mind and dissect his motivations here. Because without understanding why he's doing all of this, it's impossible to predict exactly how it will play out. There are three main motivations for this type of corporate takeover. So let's go through them one at a time. Let's start by level setting. Elon Musk is by far the richest person in the world. He has over $250 billion stockpiled from huge wins with Tesla and SpaceX. So it wouldn't be crazy to say that he's motivated by money. Twitter's value as a company has been stagnant for years now. The stock price really hasn't moved much over the last nine years. But during that time, Elon has increased Tesla's share price by more than 30x. So if Elon could turn Twitter into a High growth tech stock. Certainly he could make a lot of money, right? Well, it's not quite that simple. See, at $30 billion in market cap, Twitter is still a pretty small company, at least by Elon's standards. Buying the entire company would cost him around 10% of his net worth. If he then doubles the value of Twitter by improving the service, he's only 10% richer. He would need to completely reinvent the company in order to make a meaningful profit. And he has way better opportunities in front of him with SpaceX and Tesla. If he can just deliver the cybertruck a little bit earlier than expected, he'll probably increase his net worth by more than he ever could by turning Twitter around. It's also surprisingly difficult to buy 100% of the Twitter shares, even for Elon. Sure, he's worth $250 billion on paper, but he can't convert all of that to cash overnight. He did sell $16 billion of Tesla stock last year, but he'd need even more money to cover the full 30 billion required to buy Twitter outright. He could go find a partner to help fund the purchase, but that might be tricky because then he would have to give up some control, and banks aren't likely to lend him enough money to do a full buyout. Most banks cap their lending at 6 times earnings, but Twitter trades at 60 times earnings. So debt could really only cover 10% of the sticker price. Now that Elon has made an offer offer to take Twitter private, lots of people are speculating how he'll pull together the money he needs to get it done. But Elon's a resourceful guy, and even if he has to take out a massive loan against his Tesla shares, he'll do it. At the end of the day, this battle is about more than money to him. So we can rule out pure profit as the main motivation here. It's just too complicated and wouldn't make a significant impact on Elon's total net worth. But maybe it's just a flex. Billionaires love to buy fancy things. And. And what's fancier than owning an app that 200 million people use around the world? Elon has said that he wants to get rid of his material possessions. Perhaps owning Twitter would give him more clout than competing with Bezos to build the world's largest yacht. I mean, Jeff Bezos and Elon Musk have a long history together. Blue Origin and SpaceX are constantly duking it out to reach new milestones and win splashy headlines. And Jeff Bezos did buy The Washington Post in 2013 for $250 million. So maybe Elon wants to one up Jeff in the media world and show em who's boss. Twitter might cost 100 times more money than an old newspaper company, but it certainly has a bigger impact. There are two main ways to look at the value of Twitter. You can look at it like a business, or you can look at its impact on the world. For most companies, these two metrics are usually pretty closely aligned. But not for Twitter. Major news breaks first on Twitter. Journalists, celebrities, billionaires, and even tech YouTubers hang out there. But as a business, Twitter has been struggling for years. The company is so behind on monetization that that Mark Zuckerberg once said it's as if they drove a clown car into a gold mine and fell in. Twitter's impact on the world is unquestionable though. So owning it would be the perfect gift for the man who has everything. But the Twitter board of directors is already fighting back against Elon's buyout bid. Even though this story is a big surprise, Twitter already has a set of defenses in place that could make it extremely difficult for Elon to win. This is because Twitter's corporate bylaws are filled with special provisions called poison pills. The goal of these poison pills is to prevent hostile takeovers. If you're running a public company and you like your job, you probably don't want someone to sneak up on you and kick you out without a fight. These provisions are common in founder led companies, but Jack Dorsey stopped serving as Twitter CEO months ago. The poison pills remain though, so getting full control over the board of directors will be difficult, but not impossible. Elon is determined to move forward with this takeover, but it's going to be an extremely messy fight with tons of legal red tape. Even if he can get it done, it wouldn't be nearly as fun as building a new mega yacht. So we can safely rule out the idea that Elon is buying Twitter as a crazy billionaire. Flex so what about influence? Lots of people are saying that Elon wants to take over Twitter so that he can bend the rules and drive more attention to his companies. It's pretty clear that Twitter is an important platform for elon. He has 80 million followers on there, and unlike most of the other celebrities with massive followings on there, he actually posts viral tweets regularly instead of just using Twitter as a press release outlet. Like most companies companies, Elon is constantly building a real community of supporters. They watch the SpaceX launches, they buy Teslas, and they amplify everything he says. But that's the thing. All of that is already happening. Elon hasn't been shadowbanned or deplatformed. His tweets do incredibly well. And the idea that Elon could use Twitter to manipulate Tesla's stock price just doesn't add up. The SEC has rules about stock manipulation and enforces those regardless of who owns the social media platform. And the SEC has used those rules to fine Elon in the past. He tweeted that he was considering taking Tesla private and quickly wound up in hot water with the government. Nothing would be different if he owned more shares in Twitter. If anything, the SEC would be watching more closely than ever. So if Elon isn't buying Twitter to make money, flex on Bezos, or increase his reach, why is he buying it? Well, instead of speculating, let's just ask someone who's worked with Elon directly. What this is really about is free speech. That's David Sachs, who worked with Elon at PayPal and is one of the many Silicon Valley leaders who are pushing for more free speech across social media platforms. Over the past few years, we've seen social media platforms censor and remove a wide variety of accounts. It's a complicated problem since at the end of the day, these companies are for profit businesses. That means that if they can make more money by deplatforming certain accounts, they're incentivized to do so. The problem is the effect that this has on our society. Corporate censorship doesn't actually prevent people from speaking their mind. It just forces forces them to do so on different platforms with no one to push back on them. After Donald Trump was banned from Twitter, he immediately started working on a new social network where he could say anything he wanted. This creates echo chambers where people go to reinforce their beliefs without ever being challenged. The end result is increasing political polarization. But Elon isn't a Trump supporter, and he's not at risk of being deplatformed. So why does he care so much about free speech? Well, as he said in a recent Twitter poll, free free speech is essential to a functioning democracy. And this gets to the heart of his motivations. Elon can only build the type of companies he wants in a free country. As we've seen all too often, billionaires who build companies in authoritarian countries tend to go missing or wind up poisoned. So Elon is fighting for free speech, he's fighting for democracy, and he's fighting for America. But how is Elon actually going to ensure that Twitter upholds the principles of free speech. Well clearly Elon has no choice but to try and buy the entire company. He's Planning to pay $43 billion to acquire Twitter and take it private. This is extremely risky but could unlock big opportunities. Elon is a massive talent magnet for the world's top engineers and with him at the helm lots of people will want to go work at Twitter. Even though Elon is only offering a modest 20% premium to the current share price, he's already pumped the stock 30% just by buying a small stake. He basically turned Twitter into a meme stock overnight and if the board declines his offer he'll sell his shares and the market will likely react harshly. Twitter gets a ton of traffic every day but their monetization strategy just doesn't match the customer base that they serve. Changing Twitter's business model would be impossible while they are a public company, but if Elon succeeds in taking the company private we could see things change pretty dramatically.