Your browser does not support JavaScript!

The Transformation and Future of Twitter under Elon Musk

GOOVER DAILY REPORT 6/7/2024
goover

TABLE OF CONTENTS

  1. Introduction
  2. Elon Musk's Initial Acquisition Attempt
  3. Merger with X Corp
  4. Leadership Changes
  5. Glossary
  6. Conclusion
  7. Source Documents

1. Introduction

  • This report explores the significant events and decisions that have shaped the transformation of Twitter under the leadership of Elon Musk, including his acquisition attempt, the merger with X Corp, and the ongoing changes in the company's structure and leadership.

2. Elon Musk's Initial Acquisition Attempt

  • 2-1. Musk Begins Investing in Twitter (January 2022)

  • In late January 2022, Tesla CEO Elon Musk started investing in Twitter. This marked the beginning of a series of strategic moves towards acquiring the company.

  • 2-2. Musk’s 9.2% Share Disclosure (March 14, 2022)

  • On March 14, 2022, Musk disclosed that his stake in Twitter had reached 9.2%, making him the largest shareholder in the company. The disclosure led to a significant increase in Twitter's share price.

  • 2-3. Twitter Board Invitation and Subsequent Refusal (April 2022)

  • Twitter invited Musk to join its board of directors on April 5, 2022. However, by April 10, 2022, Musk had declined the offer. Twitter CEO Parag Agrawal acknowledged the situation, stating that the company's goals and priorities remained unchanged.

  • 2-4. Musk’s Acquisition Offer (April 2022)

  • Musk offered to buy Twitter at $54.20 per share on April 14, 2022, valuing the company at approximately $43 billion. He emphasized the potential of Twitter as a platform for global free speech.

  • 2-5. Twitter’s Poison Pill Provision (April 2022)

  • On April 15, 2022, Twitter adopted a poison pill provision to prevent Musk's acquisition. This provision allowed existing shareholders to purchase additional shares at a discounted price, diluting Musk's shares and making the acquisition more expensive for him.

  • 2-6. Musk Secures Financing (April-May 2022)

  • Musk secured commitments of about $46.5 billion in financing for the acquisition by April 21, 2022. This was later bolstered by an additional $7 billion from various sources, including venture capital firms and cryptocurrency platforms, in early May.

  • 2-7. Deal Acceptance and Financing Details (April-May 2022)

  • Twitter accepted Musk's acquisition bid on April 25, 2022, valuing the deal at $44 billion. To finance the bid, Musk sold about $8.5 billion worth of Tesla stock over three days.

  • 2-8. Concerns Over Bot Accounts and Deal Hold (May 2022)

  • In May 2022, Musk began raising concerns over the number of spam and bot accounts on Twitter. On May 13, 2022, he announced that the deal was 'temporarily on hold' due to these concerns about the platform's reported metrics.

  • 2-9. Class-Action Lawsuit Against Musk (May 2022)

  • On May 26, 2022, Twitter shareholders filed a class-action lawsuit against Musk, alleging stock manipulation amidst the tumultuous acquisition process. At this time, Twitter’s stock price had fallen significantly since Musk announced his bid.

  • 2-10. Termination Attempt and Ensuing Lawsuit (July 2022)

  • On July 8, 2022, Musk announced his intent to terminate the acquisition, citing the issue of fake accounts. Twitter responded by suing Musk on July 12, 2022, in Delaware Chancery Court to force him to complete the deal. Twitter argued that Musk had violated the merger agreement terms and sought to hold him accountable.

3. Merger with X Corp

  • 3-1. Twitter merges with X Corp (April 2023)

  • Twitter Inc. officially merged with X Corp in April 2023, as revealed through court filings. The filings confirmed that Twitter Inc. no longer exists and has been absorbed by X Corp. Elon Musk's vision involved merging Twitter into X Corp to create a super-conglomerate under X Holdings Corp, which includes Tesla, SpaceX, Neuralink, and The Boring Company.

  • 3-2. Implications of the merger for Twitter's structure

  • The merger of Twitter with X Corp resulted in significant structural changes. X Corp is now the 'successor in interest' to Twitter Inc. The parent company X Holdings Corp aims to consolidate Musk's ventures into one entity. This structural change has essentially wiped out the existence of Twitter Inc. as an independent entity, rebranding it under X Corp's umbrella.

  • 3-3. X Corp and Musk's vision for the 'everything app'

  • The merger plays a crucial part in Musk's broader strategy to develop an 'everything app,' named X. Inspired by China's WeChat, this app aims to combine various functionalities, including social networking, digital payments, and content creation. Musk has indicated that merging Twitter into X Corp accelerates the development of this app.

  • 3-4. Public and stakeholder reactions

  • Public and stakeholder reactions to the merger have been mixed. While some view this as a strategic move to innovate and expand Twitter's capabilities, others are skeptical of Musk's intentions. Social media users were perplexed by Musk's cryptic tweet 'X' announcing the merger. Stakeholders have expressed concerns about potential regulatory hurdles and market competition that the 'everything app' could face.

  • 3-5. Court filings and legal acknowledgments

  • Court filings played a pivotal role in revealing the merger. The documents clarified that Twitter Inc. has been integrated into X Corp. Legal acknowledgments note that X Holdings Corp is the overarching parent company. The filings were linked to a lawsuit unrelated to the merger, filed against the former Twitter Inc. for federal racketeering violations.

4. Leadership Changes

  • 4-1. Introduction of new CEO (May 2023)

  • Elon Musk announced on a Thursday in May 2023 that he has found a new CEO for Twitter, or X Corp. as it’s now called. Although he did not name her, he mentioned she will be starting in about six weeks. This marks a significant transition in leadership since Musk, who bought Twitter in the fall of the previous year, has consistently maintained that he is not the permanent CEO of the company.

  • 4-2. Elon Musk's transition to Executive Chairman and CTO

  • Following the appointment of the new CEO, Elon Musk stated that his role would transition to Executive Chairman and Chief Technology Officer of Twitter. Musk has expressed that he does not desire to be the CEO of any company and indicated his preference for focusing on engineering. During his testimony in a Delaware court in mid-November of the previous year, Musk mentioned his intention to find someone else to run Twitter over time.

  • 4-3. Market and business analysts' reactions

  • Analysts have responded positively to the news of a new CEO. Insider Intelligence analyst Jasmine Enberg remarked that the biggest problem with Twitter’s advertising business was Elon Musk, and his stepping back could help separate Musk’s personal brand from the company’s image. This could possibly lead to regaining trust among advertisers. However, the success of this effort depends on who takes over as the new CEO.

  • 4-4. Implications for Twitter's business operations and advertising

  • Under Musk’s management, Twitter's advertising business faced challenges, but Musk mentioned in a recent interview with BBC that the company is now 'roughly' breaking even. The new CEO is seen as a necessary change for improving Twitter’s advertising business and operations. Musk's announcement also had a positive impact on Tesla’s shares, which rose by about 2 percent, reflecting shareholders' relief over Musk potentially dedicating less time to Twitter.

5. Glossary

  • 5-1. X Corp [Company]

  • X Corp is the successor to Twitter Inc. following a merger announced in April 2023. Elon Musk envisions X Corp as part of his broader strategy to create an 'everything app,' combining social media, payments, and other services under one umbrella company.

  • 5-2. Elon Musk [Person]

  • Elon Musk, the CEO of Tesla and SpaceX, acquired Twitter and merged it with X Corp. His vision for Twitter involves transforming it into a component of a larger 'everything app' that integrates various functionalities similar to China's WeChat.

  • 5-3. Twitter Inc. [Company]

  • Twitter Inc. was a major social media platform until its merger with X Corp in April 2023. The merger ended Twitter Inc.'s existence as an independent entity, incorporating it into Elon Musk's larger strategic framework.

  • 5-4. Everything App [Concept]

  • The 'everything app' is a concept popularized by Elon Musk, aiming to create a single platform that combines social media, payments, e-commerce, and other digital services, mirroring the functionalities of China's WeChat.

6. Conclusion

  • The transformation of Twitter under Elon Musk's leadership has been marked by significant strategic decisions, from the initial acquisition attempt to the merger with X Corp. These changes signal Musk's broader vision for an 'everything app' while also posing new challenges and opportunities for the platform.

7. Source Documents