How Twitter fits into Mr Musk’s broader suite of business interests is the subject of much speculation. Last week he tweeted that “buying Twitter is an accelerant to creating X, the everything app”.
While he didn’t go into detail about what that app might be, Mr Musk has previously drawn a comparison with WeChat, the Chinese app that combines social media with payments and games, and boasts around 1 billion users.
In June, he told Twitter employees that “there’s no Wechat equivalent outside of China … You basically live on Wechat in China. If we can recreate that with Twitter, we’ll be a great success.”
Fellow Australian Twitter investor Forager Funds says a good management team could grow the social media platform’s business markedly without it becoming an ‘everything app’.
“Twitter the product has a sort of magic that its power users understand, but expensive innovations the company has worked on the past decade have rarely done much to improve, nor commercialise it,” Gareth Brown, portfolio manager at Forager Funds, says.
While it’s a well-known issue that Twitter’s performance lags its potential, there have been signs of life that gave public market investors hope.
As a technology business, Twitter has spent millions over the last few years establishing high-grade server farms in California, and on the product front, the company has been releasing waves of features designed to monetise its captured users.
Small one-time payments via ‘Tips’, monthly subscriptions through ‘Super Follows’, and public moderation platforms via ‘Ticketed Spaces’ have all contributed to Twitter’s expanding bottom line.
Add to this digital marketing strategies like Prompted Ads, Follower Ads, and short video ads have emerged, with Twitter spruiking its geolocation, keyword, conversation targeting features for digital marketers hungry to pay for eyeballs anywhere on the internet.
Financing the deal
But the future of Twitter looks to be in Mr Musk’s hands, not equity investors, though given the rollercoaster of the last few months it’s fair to assume the deal isn’t done until the money lands in Twitter’s accounts.
Indeed, how Mr Musk will finance the deal remains the top question. When he bid for Twitter in April, he offered $US54.20 per share. At the time, Morgan Stanley led a consortium of banks to provide $13 million of debt financing, with Mr Musk set to provide the other $33.5 billion.
Since that time, markets have suffered savage sell-offs and there has been a drastic re-pricing of technology stocks. This affects not only the price of Twitter, but the expanse of Mr Musk’s personal wealth, the majority of which comes from his holding in Tesla, his electric vehicle company.
Analysts have been calculating how much Tesla stock Mr Musk needs to sell to afford the $US33.5 billion price tag. As part of the court case Twitter brought against Mr Musk when he tried to back-track out of the deal, text messages between Mr Musk and high-profile investors including Google’s Larry Ellison and venture capital investors Andreessen Horowitz emerged.
They show he had raised about $US7.1 billion in equity commitments, but it hasn’t been confirmed that that funding will be part of how Mr Musk ultimately pays for Twitter.
If Mr Musk decides to terminate the deal entirely, without going through the court process that is still ongoing, it will cost him $US1 billion.