Elon Musk is on the cusp of owning social media giant Twitter outright. That has stirred up a lot of controversy in the markets, social media space, and among ideologues on both sides of the free speech and tech censorship debate. But what does it mean? How should investors be viewing this? Is Elon going to turn Twitter into a high-performing company, or is he just trying to make a very expensive point?
If you have been following Elon Musk for any length of time, you know he is no shrinking violet, willing to stake his reputation and money on elaborate ventures. He’s a master showman who seems to get great pleasure out of yanking people’s chains in business and politics. While he is prone to exaggeration, I don’t think he’s a liar. He’s truly a visionary in the mold of Steve Jobs, who is revolutionizing the world with ground-breaking innovations.
Is He in it for Investment Returns?
What he’s up to with his bid for Twitter is not certain. One thing for sure is he’s not in it for a return on his money. From a pure investment perspective, there’s nothing to like about Twitter. The numbers don’t make any sense. The company has struggled for years to develop a business model that can generate profits. Twitter has never been considered a high-performing company, and its stock price reflects that.
Another reason he might have invested in the company is to rebuild it and turn it into a profitable venture. However, there have been a lot of intelligent people on the board and in the C-suite who have not been able to get the company moving in the right direction. I’m not convinced that, as great as Elon Musk is at innovation, he probably doesn’t have the silver bullet to fix Twitter from a business perspective.
Besides, if he does have some magic elixir for what ails social media, he could have taken his billions and built the same business from scratch, only better and at a fraction of the cost with a much higher return. So, it is pretty apparent he’s not buying Twitter as an investment.
Or is He Making an Elaborate Statement?
In this instance, you probably have to take Musk at his word. He’s been very vocal about his concern for free speech and tech censorship, particularly with Twitter and its command of the so-called public square. To that extent, his purchase of Twitter is, in part, a statement. He seeks change in the way the Twitter public square is managed, particularly to remove arbitrary constraints on free speech.
It could also be a vendetta of sorts. After all, Musk could have built his own platform from scratch to compete with Twitter. But he seems to relish the meltdown happening in the media and liberal circles, as his tweet teases indicate. And you could hear heads exploding when he decided to take Twitter private. He can have his way with little public scrutiny.
What Should Investors Take Away from all This?
So, what should investors take away from the Twitter purchase? How will it impact the social media space? Will it create opportunities?
While it’s possible his ownership of Twitter could influence how social media is administered, possibly changing the trajectory of social media companies competing for clicks, it is also a glaring indication of the amount of uncertainty in the space. He may force other companies to rethink their business models.
As for investors in Twitter, Musk may be doing them a favor if he takes the company private. Twitter stock is going nowhere fast. He may reveal some magic bullet to turn the company around, but it will be a very choppy ride. Right now, Twitter is not an investable company.
Whatever it is, it Should be Popcorn-Worthy Entertainment
Of course, Musk being Musk, he is now threatening to change his bid price, citing a lack of transparency over bots and fake accounts. He is considering lowering his bid or abandoning it altogether based on findings from an audit, which is reflected in the stock price, now off nearly 20 points from its recent spike.
One thing we can count on is it will be entertaining. There’s not much to see here from an investment standpoint, but Musk, the consummate showman, will make it fun to watch.