Acquisition of Twitter by Elon Musk

Elon Musk published his first tweet on his personal Twitter account in June 2010,[3] and had more than 80 million followers at the time of the purchase.[4] In 2017, in response to a tweet suggesting Musk buy Twitter, he replied, "How much is it?"[5] On March 24, 2022, Musk began tweeting statements critical of Twitter,[6] polling his followers on whether Twitter adhered to the principle that "free speech is essential to a functioning democracy".[7]

Musk had begun to buy Twitter shares on January 31, 2022.[6] On April 4, Musk announced that he had acquired 9.1 percent of Twitter's stock for $2.64 billion on March 14,[8] making him the company's largest shareholder.[9] Following the announcement, Twitter's stock experienced its largest intraday surge since the company's initial public offering (IPO) in 2013, rising by as much as 27 percent.[10] On April 5, Twitter invited Musk to join the company's board of directors,[11] which Musk accepted.[12] The position would have prohibited Musk from going beyond a 14.9 percent ownership stake.[13] Four days later, before Musk's appointment was set to take effect, Musk reversed his decision to join the board after publishing several tweets critical of the company.[14]

On April 14, Musk made an unsolicited and non-binding offer to purchase the company for $43 billion, or $54.20 per share, and take it private.[16] The bid was described as a hostile takeover attempt,[17][18] with the company responding that the board would "carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and all Twitter stockholders".[19] In a TED interview, Musk stated that he believed in the company's "potential to be the platform for free speech around the globe", calling free speech a "societal imperative for a functioning democracy" and insisting that he had not made the offer to increase his wealth.[20][21] According to critics, however, he showed little interest in fighting government censorship around the world, saying that "Twitter should match the laws of the country", instead showing most concern at Twitter's moderation policies.[22] The price of $54.20 per share is believed to be a reference to 420, a slang term in cannabis culture for marijuana consumption.[23]

On April 15, Twitter's board of directors announced a "poison pill" strategy, which would allow shareholders to purchase additional stock in the event a hostile takeover should occur; the plan will expire on April 14, 2023.[1] On April 20, Musk disclosed that he had secured financing provided by a group of banks led by Morgan Stanley, Bank of America, Barclays, MUFG, Société Générale, Mizuho Bank, and BNP Paribas, for a potential tender offer to acquire the company. The proposed acquisition was financed by:

• $7 billion of senior secured bank loans;
• $6 billion in subordinated debt;
• $6.25 billion in bank loans to Musk personally, secured by $6.25 billion of his Tesla stock;
• $20 billion in cash equity from Musk, to be provided by sales of Tesla stock or other assets;
• $7.1 billion in equity from 19 independent investors.[24][25][26][27]

The initially proposed $13 billion in money borrowed by Twitter was equivalent to seven times the company's 2022 projected operating cash flow; some banks found that multiple too risky and opted to participate only in the $12.5 billion margin loan to Musk.[28] The debt is estimated to cost Twitter approximately $1 billion in annual interest and fees.[29] Two days after announcing his bid, Musk registered three holding companies under the name "X Holdings" in preparation for his takeover.[30]

Tesla shares fell 12% on the day after the acquisition was announced, amid smaller declines in the broader markets. Musk incurred a $21 billion paper loss that day. Excluding stock he has pledged to banks as collateral for his $12.5 billion personal loan, Musk has $11 billion in freely-sellable Tesla shares, $10 billion less than he needs for his $21 billion cash equity contribution. One means of meeting the shortfall would be to exercise some of his Tesla stock options, which would be taxed as ordinary income. Within three days after Twitter agreed to be acquired, Musk had sold $8.5 billion of his Tesla shares.[31][32]

By May 5, the New York times said while some traditional investors had initially shied away, notable technology investors had "clamored" to commitment $7.1 billion in equity, including Andreessen Horowitz, Sequoia Capital, Prince Al Waleed bin Talal Al Saud, Larry Ellison, Binance, and the Qatar Investment Authority.[33] The equity infusion reduced his original $12.5 billion personal bank loan to $6.25 billion and slightly reduced his required cash equity contribution from $21.0 billion to just under $20.0 billion.[34][35]

On April 24, multiple outlets reported that Twitter was in final negotiations to accept Musk's offer,[36][37] with a deal expected to be reached by the next day.[38] However, Reuters cautioned that the deal could still fall apart at the last minute.[39] Twitter's board publicly and unanimously accepted the buyout offer on April 25 for $44 billion, and Twitter will become a private company once the transaction is completed sometime in 2022.[40] The deal will require shareholder and regulatory approval before it can be finalized,[41] though analysts believed it was unlikely to be challenged by regulators.[42] If Musk backs out of the acquisition, he will be required to pay Twitter a $1 billion breakup fee.[43] Twitter CEO Parag Agrawal will receive $39 million from the buyout, while Twitter's co-founder and former CEO Jack Dorsey will receive $978 million.[44] Tesla's stock sank by more than $125 billion the next market day, causing Musk to lose approximately $30 billion of his net worth.[45][46]

After the acceptance was announced, Musk stated that his first plan is to make the algorithm that ranks tweets in the content feed open source, in order to increase transparency. He has also stated his intention to remove spambots and "authenticate all real humans".[47] He suggested that he might convert Twitter's San Francisco headquarters into a homeless shelter.[48] Musk does not have confidence in Twitter's corporate management,[49] and he published tweets critical of decisions made by Twitter executives such as Vijaya Gadde;[50] Twitter users then harassed the executives with a few using racist and sexist language.[51][52] Former Twitter CEO Dick Costolo denounced Musk's criticism, while Agrawal stated that he was proud of Twitter employees "despite the noise" around the company.[50]

On April 27, Musk tweeted: "For Twitter to deserve public trust, it must be politically neutral, which effectively means upsetting the far right and the far left equally."[53]

On April 28, Twitter reassured advertising agencies that their work would not be seen next to offensive material.[54] Musk had also discussed with bankers with the ideas of cutting jobs and costs, encouraging influencers to be creative, and adding subscription services to Twitter.[55][56]

Following Musk's induction to Twitter's board of directors on April 5, Agrawal wrote that he believed Musk's appointment would bring long-term value to the company, while Dorsey wrote that Musk "cares deeply about our world and Twitter's role in it".[12] On April 11, Agrawal stated that he believed Musk's withdrawal from the board was "for the best", noting that the company would "remain open to his input".[14] The next day, Twitter shareholders sued Musk for allegedly manipulating the company's stock price and violating SEC rules.[57]

Musk's offer was met with both praise and criticism.[58] Media outlets expressed concerns that Musk's proposed changes to Twitter would result in more disinformation and harassment.[58] Conservative and Republican commentators and politicians who believed Twitter discriminated against right-wing speech expressed enthusiasm for Musk's proposed changes.[58][59] On April 14, Twitter employees expressed concern with Musk's views on free speech.[60][61] On April 19, the National Urban League urged Twitter to turn down Musk's takeover bid, warning of potentially negative consequences on users' civil rights.[62] On April 22, House Republicans in the U.S. demanded that Twitter's board preserve all records pertaining to Musk's takeover proposal, which sets the stage for a potential congressional probe following the 2022 midterms.[63] According to a poll conducted by Harvard University's Center for American Political Studies (CAPS) and the Harris Poll, 57 percent of American voters approved of Musk's purchase of Twitter.[64] Jimmy Patronis, the Chief Financial Officer of Florida, praised Musk's offer and was critical of Twitter's "poison pill" strategy.[65] On April 25, following reports that Twitter was poised to accept Musk's offer, Twitter's shares rose by 5 percent.[66]

Agrawal applauded the purchase and assured employees that no layoffs were planned at that time.[67][68] Dorsey endorsed the sale, saying that "taking [Twitter] back from Wall Street is the correct first step" and that he trusted Musk to be the new owner of the company.[69] Republican lawmakers in the U.S. Congress such as Jim Jordan, Yvette Herrell, Marsha Blackburn, and Ted Cruz praised the deal, calling it a restoration of free speech. Democratic lawmakers such as Pramila Jayapal, Jesús García, Marie Newman, and Mark Pocan criticized Musk and the buyout.[70] Former U.S. President Donald Trump expressed approval with the deal but stated that he would not rejoin the platform, even if he is unbanned, due to his preference for his own social media platform, Truth Social.[71] President of Mexico Lopez Obrador stated that he hopes Musk will "clean it up… of the corruption that's there, manipulation with bots".[72] By April 27, 30,000 new users had joined open-source Mastodon servers.[73] Conservative Twitter accounts experienced a significant increase in followers, while liberal ones experienced a slight decrease.[74] Many left-leaning users left the platform following the buyout.[75]

Twitter general counsel Vijaya Gadde was criticized by Musk, cried during a meeting after the announcement, and was subsequently subjected to online ridicule.[76] Agrawal led an all-hands meeting on April 29 to address concerns raised by employees.[77] Some LGBTQ+ users and activists have expressed apprehension about the deal based on tweets by Musk mocking transgender people and fear that the re-platforming of suspended Twitter accounts will lead to a rise in online harassment and hate speech.[78][79] Followers of the QAnon conspiracy theory celebrated the purchase, believing Musk's free speech approach would allow them back onto the platform.[80] FCC commissioner Brendan Carr responded to calls for the agency to block the purchase by saying that it has no authority to do so, calling such requests "absurd".[81]

Henrik Fisker, co-founder of electric vehicle maker Fisker Inc. and a rival of Musk's, left Twitter shortly after the acquisition announcement.[82] Amazon founder Jeff Bezos questioned whether Tesla's business interest in China would give the Chinese government leverage over Twitter via Musk, before answering that it would "probably not".[83][84] Microsoft co-founder Bill Gates questioned if Musk would allow the spread of public health misinformation, including vaccine misinformation.[85] Thierry Breton, the European Commissioner for Internal Market, emphasized that "any company operating in Europe needs to comply with [their] rules", while the European Union announced that new online rules will "overhaul" the digital market and Tech Giants.[86]

Jim Cramer of CNBC opined that the Twitter board would have "no choice" but to reject Musk's offer due to potential personal liability faced by the board members.[87] Equity analyst Angelo Zino believed that Twitter's decision may have stemmed from their realization that alternative bidders would be unlikely to emerge due to social media companies' declining asset prices.[88] Kevin D. Williamson of National Review compared Musk's purchase of Twitter to the Donald Trump 2016 presidential campaign, calling it a publicity stunt.[89] Don Pittis of CBC News noted that Musk's purchase of Twitter has brought back the controversy over the control wealthy individuals have over media platforms.[90]

Media Matters for America and the Australian Strategic Policy Institute both suggested that China could use its influence to extract political concessions or manipulate Twitter due to Musk's ties with China.[91][92] Analyst Mike Proulx of Forrester Research cautioned that other companies may leave Twitter if Musk loosens its moderation policies.[93] Joan Donovan, research director at Harvard's Shorenstein Center on Media, Politics and Public Policy, stated on Twitter that Musk's freedom of speech without moderation would lead to online harassment.[94] Robby Soave of Reason argued that Musk's purchase would not threaten Twitter or democracy, and that "the people really overstating Twitter's importance are actually Musk's critics in progressive and mainstream media".[95] Bridger Beal-Cvetko of Deseret News noted that "despite Musk's status as a self-proclaimed 'free speech absolutist,' some are less convinced that his ownership of Twitter will bring about the downward spiral liberals fear, or the renaissance conservatives hope for."[96]

Early Bitcoin investor Roger Ver and Coinbase Inc. CEO Brian Armstrong both welcomed the buyout, citing the potential for reduction of perceived censorship on Twitter.[97]