Acquisition of Twitter by Elon Musk

Based on Wikipedia: Acquisition of Twitter by Elon Musk

The $44 Billion Impulse Buy

In the spring of 2022, the world's richest man decided to buy one of the world's most influential social media platforms. What followed was a months-long saga of legal threats, public feuding, and corporate chaos that culminated in Elon Musk walking into Twitter's San Francisco headquarters carrying a bathroom sink. "Let that sink in," he tweeted.

It was the kind of move that perfectly captured the entire acquisition: equal parts spectacle, strategy, and chaos.

The Unlikely Path to Ownership

Musk's relationship with Twitter began unremarkably enough. He posted his first tweet in June 2010, and over the following decade built one of the platform's most followed accounts. By April 2022, more than 80 million people tracked his posts about rockets, electric cars, cryptocurrency, and increasingly, his complaints about free speech.

But the seeds of acquisition were planted years earlier. In 2017, someone on Twitter suggested Musk should buy the company. His response was simple and perhaps prophetic: "How much is it?"

The serious machinations began in early 2022. Starting on January 31st, Musk quietly began purchasing Twitter shares through the stock market. By April, he had accumulated 9.2 percent of the company, worth $2.64 billion, making him Twitter's single largest shareholder. When this news became public on April 4th, Twitter's stock experienced its biggest single-day jump since the company first went public in 2013, soaring as much as 27 percent.

The Board Seat That Wasn't

Twitter's leadership initially tried the diplomatic approach. The day after Musk's stake became public, the company invited him to join its board of directors. He accepted.

This should have been a mutually beneficial arrangement. Musk would gain influence over a platform he clearly cared about, and Twitter would harness the energy of its most famous power user. There was just one catch: board membership came with strings attached. Musk would be prohibited from owning more than 14.9 percent of the company and would face restrictions on criticizing Twitter publicly.

For someone like Musk, these constraints proved intolerable.

On April 11th, after publishing several critical tweets about the company, Musk announced he would not be joining the board after all. Instead, he informed Twitter's leadership of something far more dramatic: he intended to buy the entire company and take it private.

The Offer

Three days later, on April 14th, 2022, Musk made his move. He offered to purchase Twitter for $54.20 per share, valuing the company at approximately $43 billion. The offer was unsolicited, meaning Twitter's board hadn't asked for it, and non-binding, meaning Musk wasn't legally committed to follow through.

The price itself carried an inside joke. The number $54.20 contains "420," a reference to marijuana culture. Musk had previously gotten into trouble with the Securities and Exchange Commission, commonly known as the SEC, for tweeting that he was considering taking Tesla private at $420 per share, which turned out to be a joke that the SEC didn't find funny at all. Now he was embedding the same number into an actual takeover bid.

In a TED interview around this time, Musk explained his reasoning. He wanted to transform Twitter into what he called "a platform for free speech around the globe," describing free speech as "a societal imperative for a functioning democracy." He insisted the purchase wasn't about money.

Critics weren't convinced. They noted that Musk seemed more interested in changing Twitter's moderation policies than in addressing government censorship. According to reporting from The Washington Post, the banning of certain accounts, including the satirical website The Babylon Bee, had helped motivate his decision to pursue the acquisition.

The Poison Pill

Twitter's board didn't immediately capitulate. On April 15th, they announced a defensive measure with a colorful name: a "poison pill."

This strategy, formally called a shareholder rights plan, works like this: if a hostile acquirer accumulates shares beyond a certain threshold, the company floods the market with new shares available to all other shareholders at a discount. This dilutes the hostile party's stake and makes the acquisition prohibitively expensive. It's a common defense mechanism in corporate America, designed to force potential buyers to negotiate with the board rather than simply purchasing shares on the open market.

But the poison pill was a delaying tactic, not a permanent solution. Twitter's largest institutional shareholders, the massive investment funds that held significant stakes in the company, pressured the board to take Musk's offer seriously.

Securing the Financing

Buying a company for $44 billion requires, unsurprisingly, $44 billion. Even for the world's richest person, this meant assembling a complex financing package.

On April 20th, Musk revealed his plan. A consortium of major banks including Morgan Stanley, Bank of America, Barclays, and several international financial institutions would provide debt financing. The package included $7 billion in senior secured loans to Twitter itself, $6 billion in subordinated debt, and $6.25 billion in personal loans to Musk secured against $62.5 billion worth of his Tesla stock.

Musk would contribute $20 billion in cash equity, funded by selling Tesla shares and other assets. Additionally, 19 independent investors would chip in $7.1 billion. This last group included some of Silicon Valley's biggest names: Oracle co-founder Larry Ellison, Saudi prince Al Waleed bin Talal Al Saud, and venture capital powerhouses Andreessen Horowitz and Sequoia Capital.

The debt load was substantial. The loans Twitter would take on equaled about seven times the company's projected annual cash flow, and interest payments alone would cost roughly $1 billion per year. Some banks considered this ratio too risky and opted to participate only in the personal loan to Musk rather than the corporate debt.

The Deal Closes, Then Doesn't

On April 25th, Twitter's board unanimously accepted Musk's offer. The company would be taken private at $44 billion. Negotiations had been led by a three-person committee: board chair Bret Taylor, tech entrepreneur Martha Lane Fox, and Patrick Pichette, a former Google executive.

The agreement included provisions typical of large acquisitions. Musk couldn't publicly disparage the company or its employees before the transaction closed. If he failed to complete the purchase, he'd owe Twitter a $1 billion breakup fee. Existing leadership stood to profit handsomely from the sale: CEO Parag Agrawal would receive $39 million, while co-founder Jack Dorsey, who still held shares, would receive $978 million.

Markets reacted dramatically. Tesla stock dropped by more than $125 billion in the days following the announcement, costing Musk approximately $30 billion of his personal net worth on paper. Within three days, he sold $8.5 billion of his Tesla shares to help fund the acquisition.

Then things got complicated.

The Spam Bot Dispute

In early May, Musk began expressing concerns about spam accounts on Twitter. How many of the platform's users were actually real humans, and how many were automated bots designed to spread spam, scams, or propaganda?

Twitter had long claimed that spam and fake accounts represented less than 5 percent of its daily active users. Musk was skeptical. On May 13th, he announced he was putting the deal "on hold" pending investigation of this issue. Twitter's stock promptly dropped more than 10 percent.

What followed was an increasingly public and increasingly hostile dispute. When CEO Agrawal posted a detailed Twitter thread explaining why an external review of spam accounts was impractical, Musk responded with a poop emoji.

This was not typical merger negotiation behavior.

Musk demanded that Twitter prove its spam account estimates were accurate, threatening that the acquisition could not "move forward" until they did. Twitter filed documents with the SEC affirming they would "enforce the merger agreement" regardless of what Musk wanted. A shareholder filed a class action lawsuit alleging Musk was manipulating the market with misleading statements.

The Attempted Exit

In July 2022, Musk announced he was terminating the acquisition agreement entirely. His stated reason: Twitter had breached their contract by refusing to adequately address the spam bot issue.

Twitter disagreed. Strongly.

The company filed a lawsuit against Musk in the Delaware Court of Chancery, a specialized court that handles most major corporate disputes in America because so many companies are incorporated in Delaware. Twitter's position was straightforward: Musk had signed a binding agreement to purchase the company, and they intended to hold him to it.

A trial was scheduled for the week of October 17th. Both sides prepared for what promised to be one of the most closely watched corporate trials in years. Musk's legal team would need to prove that Twitter had materially misrepresented its user numbers in ways that voided the contract. Twitter's lawyers would argue that Musk was simply experiencing buyer's remorse and looking for any excuse to escape a deal he no longer wanted.

The Reversal

Weeks before the trial was set to begin, Musk reversed course. On October 4th, he announced he would proceed with the acquisition after all, at the originally agreed price of $54.20 per share.

Why the change of heart? Legal observers noted that Musk's chances of prevailing at trial appeared slim. The merger agreement he had signed contained relatively narrow conditions under which he could walk away, and "I'm worried about spam bots" didn't obviously qualify. Facing the prospect of a judge ordering him to complete the purchase anyway, along with potential penalties for breach of contract, Musk apparently decided to proceed voluntarily.

The deal closed on October 27th, 2022. Musk was now the owner of Twitter.

Cleaning House

The changes came fast.

On his first day as owner, Musk fired several top executives, including CEO Parag Agrawal, who reportedly learned of his termination by being escorted from the building by security. Chief Financial Officer Ned Segal and head of legal policy Vijaya Gadde were also terminated immediately.

Twitter was restructured into a new parent company called X Corp and taken private, meaning its shares no longer traded on the stock market. Musk installed himself as CEO.

Then came the layoffs. Approximately half of Twitter's 7,500 employees were let go in the first week. Those who remained faced a stark choice. Musk sent an email demanding that employees commit to "extremely hardcore" work, describing a culture of "long hours at high intensity." Those who weren't willing to sign up could take three months' severance and leave.

Hundreds of additional employees chose to resign rather than accept these terms.

The Rebrand

Musk had long been fascinated with the concept of an "everything app," a single platform that would combine social media, messaging, payments, and various other services into one integrated experience. Such apps already exist in Asia; China's WeChat is the most prominent example, used by over a billion people for everything from chatting with friends to paying bills to booking doctor's appointments.

In July 2023, Musk rebranded Twitter as X, replacing the iconic blue bird logo that had been synonymous with the platform since its founding. The company's headquarters received a new logo, and users were encouraged to call their posts "X's" rather than "tweets."

Linda Yaccarino, formerly an advertising executive at NBCUniversal, was appointed as CEO of X Corp, though Musk retained significant control over product decisions and company direction.

The Political Dimension

Reactions to Musk's acquisition fell largely along political lines, at least within the United States.

Conservatives generally welcomed the change. Many on the political right had long argued that social media platforms, including Twitter, exhibited bias against conservative viewpoints in their content moderation decisions. Musk's stated commitment to free speech and his criticism of what he viewed as excessive moderation resonated with these concerns.

Liberals and progressives expressed alarm. They worried that reduced content moderation would lead to increases in misinformation, disinformation, harassment, and hate speech on the platform. Many former Twitter employees, who tended to hold more progressive political views, voiced concerns about Musk's intentions and management style.

These tensions became concrete in December 2022, when Musk suspended the accounts of several prominent journalists from outlets including The New York Times, The Washington Post, and CNN. The suspensions, which Musk justified by claiming the journalists had shared real-time location data that endangered his family, drew widespread criticism from press freedom advocates and led some to question Musk's commitment to the free speech principles he had championed.

The Network Behind the Deal

Large acquisitions don't happen in isolation. Behind Musk's purchase of Twitter was a network of wealthy individuals and organizations who encouraged, financed, and ultimately benefited from the deal.

The Wall Street Journal identified what it called a "close-knit group of libertarian-leaning activists and businessmen" who had encouraged Musk to pursue the acquisition. This group included several members of the so-called PayPal Mafia, a nickname for the entrepreneurs who had worked together at the online payments company in its early days and went on to found or fund many of Silicon Valley's most successful companies.

Peter Thiel, the billionaire venture capitalist who co-founded PayPal alongside Musk, was part of this circle. So was David Sacks, another PayPal alumnus who became a podcaster and investor. Steve Jurvetson, an early Tesla investor and former board member, was also mentioned. Even Musk's brother Kimbal, who sits on Tesla's board, was reportedly among those encouraging the purchase.

Other influences were more surprising. Mathias Döpfner, the CEO of German media conglomerate Axel Springer, urged Musk to buy Twitter in text messages exchanged in late March 2022. Seth Dillon, CEO of the satirical website The Babylon Bee, whose account had been suspended by Twitter before the acquisition, was also cited as an influence.

The Financial Aftermath

Taking on $13 billion in debt to acquire a company that wasn't particularly profitable to begin with created immediate financial pressures. The interest payments alone, estimated at roughly $1 billion annually, exceeded Twitter's entire annual profits in most years.

Advertising revenue, which had historically provided the vast majority of Twitter's income, declined sharply after the acquisition. Major brands, concerned about their ads appearing alongside controversial content, reduced or paused their spending on the platform. Musk responded by experimenting with new revenue streams, including a revamped subscription service and reduced restrictions on certain types of paid content.

The value of the company itself became murky after it went private. Some estimates suggested that by 2023, Twitter might be worth less than half what Musk paid for it. Other analyses were more optimistic, noting that the company's reduced headcount had dramatically lowered operating costs.

A New Era for Social Media

Whether Musk's Twitter acquisition will ultimately be remembered as a visionary move or an expensive mistake remains unclear. What's certain is that it represented something genuinely new in the history of social media: a single individual, rather than a committee of professional managers answerable to institutional shareholders, making rapid, often controversial decisions about how one of the world's most important communication platforms should operate.

Musk brought to Twitter the same approach he had used at Tesla and SpaceX: move fast, make mistakes, fix them quickly, and don't worry too much about what critics think. This worked well in manufacturing electric vehicles and launching rockets. Whether it would work equally well for a social media platform used by politicians, journalists, and hundreds of millions of ordinary people to communicate remained an open question.

The acquisition also raised fundamental questions about the nature of free speech in the digital age. Musk argued that private social media companies had accumulated too much power over public discourse and that their content moderation decisions amounted to censorship. His critics countered that some moderation was necessary to prevent harassment, misinformation, and the organization of real-world violence.

These debates weren't new. They had been simmering since the early days of social media. But Musk's takeover of Twitter brought them to the surface in newly urgent ways, forcing both supporters and critics to articulate exactly what they thought social media platforms should be and who should control them.

The Everything App Dream

At the heart of Musk's vision for Twitter, now X, lies an ambition that goes far beyond posting short messages on the internet. He wants to build an "everything app" that would rival or surpass what WeChat has become in China.

WeChat started as a simple messaging application but evolved into something much more comprehensive. Chinese users can pay for groceries, book flights, file government paperwork, play games, and manage investments, all without leaving the app. It has become so central to daily life in China that not having WeChat is essentially not participating in modern Chinese society.

Whether such an app can succeed outside of China's unique regulatory and competitive environment is an open question. In Western markets, users tend to prefer specialized applications, different apps for messaging, payments, social media, and other functions. Apple and Google, who control the mobile operating systems through which users access apps, might not welcome a competitor that tries to consolidate all these functions.

But Musk has built his career on accomplishing things that experts said couldn't be done. He made electric cars mainstream when the auto industry considered them impractical. He built a private rocket company that now launches more payload into orbit than any nation except China. Whether he can transform a struggling social media company into the Western world's first super app will be another test of whether his unconventional approach can overcome conventional wisdom.

The story of Musk's Twitter acquisition is, in many ways, still being written.