Twitter Embraced by Musk... How Will It Change, and What Are the Challenges? (Summary)

[Image source=Reuters Yonhap News]

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[Asia Economy New York=Special Correspondent Joselgina] Social media platform Twitter has ultimately fallen into the hands of Elon Musk, the world's richest person and CEO of Tesla. Twitter's board of directors reversed its stance and agreed to accept Musk's acquisition offer. This decision came just 11 days after Musk initially proposed the acquisition.

Now, the market is focusing on how the 'Musk-style Twitter' will change. Many questions arise, from whether he will restore the account of former President Donald Trump, who was permanently banned, citing 'freedom of expression' as the reason for the acquisition, to how he will expand Twitter's revenue and user base, which heavily depends on advertising.

On the 25th (local time), Twitter announced that it had agreed to be sold at $54.20 per share, totaling $44 billion, as proposed by Musk.

Musk also stated in a press release, "Freedom of expression is the foundation for democracy to function, and Twitter is a digital town square where important discussions about humanity's future take place," adding, "I want to make Twitter better than ever."

The $54.20 per share price represents a 38% premium based on the trading day just before Musk publicly disclosed his approximately 9% stake in Twitter. This is the largest deal in the past 20 years involving the transition of a publicly traded company to a private one. The acquisition process is expected to be completed within the year after shareholder votes and regulatory approvals.

Initially, Twitter showed a negative stance, even activating a poison pill strategy right after Musk's acquisition proposal. However, after Musk revealed a $46.5 billion acquisition financing plan on the 21st, the board adopted a more positive attitude. Brett Taylor, chairman of Twitter's board, said, "We believe this is the best path for Twitter shareholders."

The New York Times (NYT) described it as "the victory of the world's richest person attempting to acquire an influential social media platform," calling the blockbuster deal "the grand finale of Musk's acquisition attempt, which once seemed impossible and was known for its unpredictability."

[Image source=Reuters Yonhap News]

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Since it became known on the 4th that Musk had become Twitter's largest shareholder, he has repeatedly hinted at systemic reforms of Twitter. A representative plan is to take the company private after acquisition. This would reduce pressure from shareholders and make it easier to change services while avoiding government oversight and regulation.

From a system perspective, significant changes are expected in content management policies. Compared to other social media platforms, Twitter has been relatively proactive in blocking fake news and hate speech, but it is anticipated that under Musk's leadership, content censorship and intervention will be minimized. When reports surfaced that negotiations were nearing completion, Musk tweeted, "I want even my worst critics to remain on Twitter. That is what freedom of expression means." This is also why the possibility of restoring former President Trump's account has been continuously mentioned in relation to this acquisition.

Additionally, Musk confirmed plans to introduce an open-source algorithm and remove 'bots' that post spam and fake news. Earlier this month, he even publicly conducted a survey asking, "Do you want an edit button?"

The business model will inevitably change as well. Musk has clearly stated his intention to reduce the number of advertisements, which are Twitter's main source of income. He said, "If survival depends on advertising, the power of companies that influence (Twitter) policies will grow," and proposed shifting to a subscription-based economy model instead of an ad-based one. Currently, over 85% of Twitter's revenue comes from advertising.

The market is flooded with question marks. From content censorship standards to global regulatory tightening, business revenue structure, internal turmoil, and market skepticism, many challenges lie ahead for Musk.

There are immediate concerns about the extent of the freedom of expression Musk advocates. There is a risk that harmful content, including fake news and hate speech, could spread extensively. Twitter has 217 million daily users, which is relatively small compared to Facebook's over 3 billion, but it is considered highly influential in shaping global discourse.

Musk's actions may also clash with global regulatory efforts to strengthen social media oversight. The European Union (EU) imposes fines of up to 6% of revenue on platform companies that fail to properly manage harmful content under the Digital Services Act. The UK is also expected to enforce a similar law by the end of this year.

Bridget Todd, secretary-general of the women's rights group Ultraviolet, argued, "Twitter could set a dangerous precedent for other social media platforms regarding content regulations and the means to ban users who violate them." White House Press Secretary Jen Psaki indirectly mentioned this concern during a briefing, saying, "The President has always been concerned about the influence of large social platforms."

Whether Musk's plan to reduce advertising will succeed from a business perspective is also a key issue. Twitter has failed to turn a profit eight times in the past decade. The Guardian reported, "Twitter shareholders have long been worried about the company's revenue and user growth." Currently, over 85% of Twitter's revenue comes from advertising.

Calming internal unrest caused by rapid changes and alleviating market skepticism are also Musk's challenges. Some speculate that a large-scale employee exodus could occur during the transition to Musk's leadership. The NYT pointed out that Twitter employees receive more than 50% of their total compensation in stock options, which could mean a reduction in actual salaries if the company goes private.

The market also views Musk's unpredictable behavior as a risk. Politico raised several important questions about Musk's acquisition, asking what role an individual with personal influence like Musk should play and what Musk truly wants.

The NYT noted that it is uncertain who Musk will appoint as Twitter's management and how he will intervene in service operations, pointing out that Musk also runs Tesla, SpaceX, the neuroscience startup Neuralink, and the underground tunnel infrastructure company The Boring Company.

Meanwhile, on the New York Stock Exchange that day, Twitter closed at $51.70, up 5.66% from the previous session. In contrast, Tesla closed down 0.70%.

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