It’s difficult to understand Elon Musk’s true intention with Twitter. One minute he says he wants to take the company private and his purchase is not motivated for money; the next he is touting aggressive user growth and revenue prospects when talking about his plan to rebuild Twitter.
Musk is the world’s richest man, but is apparently struggling to come up with enough cash to pay for the deal. He initially offered to buy Twitter outright but is now interested in partnering with existing Twitter investors.
To entice other investors to get on board, Musk promised a great deal. He vowed to double Twitter’s monthly user number and revenue by 2025, the New York Times reported, citing multiple people familiar with the discussion. He also said he would serve as the new company’s CEO, at least for a time, according to these sources.
If everything goes according to his plan, Musk said he may take Twitter public again in as soon as three years—meaning a potentially big pay day for investors.
His more near-term plans will involve rewriting some of Twitter’s policy, including lifting the permanent ban of former U.S. President Donald Trump, Musk said during an interview with the Financial Times on May 10. Twitter, under the leadership of then-CEO Jack Dorsey, banned Trump’s personal account in January 2021, after the former President used the platform to incite the violent riots at the Capitol. Musk said Dorsey, Twitter’s then CEO, now shares his opinion that any permanent ban should be reversed.
Under Musk’s financing plan, he needs to come up with $21 billion in cash and borrow $23 billion to fund the $44 billion acquisition. Since the deal was announced on April 25, he has sold $8.5 billion worth of Tesla (TSLA) shares. More recently, Musk has secured $7.14 billion in additional funds from 18 investors, according to a Securities and Exchange Commission filing on May 5.
These co-investors include several of Musk’s friends, well-known venture capital firms, mutual fund companies, Middle Eastern sovereign wealth funds, and a cryptocurrency company. Among the potential co-owners is Dorsey, who now owns 2.3 percent of Twitter. Musk is in talks to roll over Dorsey’s stake and keep him on as a shareholder of the privatized Twitter.
Twitter’s new owners may complicate Musk’s plan
Once the deal closes, they will all be Twitter’s new owners and potentially have a say in the company’s key decisions—although its new governance structure is still unclear.
“I suspect that behind the scenes everyone will seek to provide guidance and insights about strategic directions,” said Jason Schloetzer, a professor who teaches corporate governance at Georgetown University.
If Musk’s initial vision of Twitter appeared to be something between a vanity project and a laboratory for free-speech experimentation, it now appears to resemble something much more like a business, with partners seeking a return on their investments. That means Musk may find that he has to rein in his more radical ideas about the future of Twitter’s, lest he disrupt its business model.
Twitter’s new owners will likely support any policy as long as it brings profit to the company, Schloetzer said. “It would seem that, ultimately, these stakeholders want to earn a return on their investment more so than shape notions of speech.”
The investors revealed in last week’s SEC filing include Larry Ellison, the cofounder of Oracle and a board member of Musk’s Tesla, and venture capital powerhouse Andreessen Horowitz. Ellison and Andreessen Horowitz’s founders are vocal supporters of Musk’s business decisions, including his plan to reshape Twitter.
“Elon is the one person we know and perhaps the only person in the world who has the courage, brilliance, and skills to fix all of these and build the public square that we all hoped for and deserve,” Ben Horowitz, cofounder of Andreessen Horowitz, said in a tweet on May 5 that confirmed his firm contributed $400 million to the acquisition.
Oracle’s Ellison has committed $1 billion in exchange for about 2.3 percent of Twitter, making him the largest incoming investor after Musk. Other notable co-investors include venture capital firm Sequoia, Qatar’s sovereign wealth fund, Dubai-based investment firm Vy Capital, and Binance, the world’s largest cryptocurrency exchange.
But not every new Twitter owner is a friend of Musk’s. The platform’s largest individual shareholder before Musk came along, Saudi Arabia’s Prince Alwaleed bin Talal, will roll over his approximately 5 percent stake to the privatized Twitter and stay on as a large shareholder, according to an SEC filing on May 9.
Prince Alwaleed initially rejected Musk’s offer to buy Twitter, saying the offered price of $54.20 per share is nowhere “close to the intrinsic value of Twitter given its growth prospects.” Musk fired back by mocking the prince’s small stake in Twitter and his country’s notorious repression of speech.
It remains to be seen if Musk vision of Twitter as a free-speech paradise can co-exist with Alwaleed’s plans for the company as an investment. At the very least, it should make for some interesting board meetings.