Elon Musk’s proposed hostile takeover of Twitter will be a fascinating battle that will have consequences far beyond the stock market. It is exposing just how financially strange social media and conventional media have become.
Over the last two years social media companies, especially Twitter, are doing something rarely seen in business life: telling many of their customers to go away. They are cancelling the accounts of users using the excuse that it is a violation of what they deem to be ‘community standards’.
Compare this ‘content moderation’ and shadow banning with Twitter’s vision statement, which says the company aims to: ‘give everyone the power to create and share ideas and information instantly without barriers’ in order to improve ‘a free and global conversation.’ That is an ideal that has long since been thrown in the bin.
Removing customers might be excusable as a targeting strategy if Twitter actually made a profit. But it does not. It has only been in the black in two years of its existence and last year made a $US220 million loss. It has always been a bit of a mystery why a company that has made so many losses should be valued so highly. It is probably why in the months leading up to Musk’s bid, the share price was steadily falling; in March it was down by more than half from its peak a year ago. Musk’s valuation of the company at $US43 billion is over 60 per cent higher than the shares were trading in February.
The corporate moves so far have been fairly straightforward. The board instituted what is called a poison pill defence whereby, if Musk’s holding goes above 15 per cent, the other shareholders will be offered new, discounted shares to dilute the value of the predator’s holding. Poison pills are not unusual, but they are high risk. As Musk observed (on Twitter): ‘If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty. The liability they would thereby assume would be titanic in scale.’
'Musk may be arguably the world’s most successful capitalist but he is a mere billionaire. He is going up against the trillions controlled by the titans of managerial capitalism, with all their entrenched interests.'
Musk can get around the problem by joining forces with an investor consortium, whereby other friendly players purchase below the 15 per cent level and together they acquire a majority. He may