Twitter: Elon Musk’s risky political bet

Elon Musk shares with Donald Trump certain character traits and… an immoderate love for Twitter – at least, as far as the former president is concerned, until he was excluded from it after the 2020 US election. Since 27 October, economic news is dominated by the takeover of the social network Twitter by the richest man in the world, whose fortune was estimated, at its peak in April 2022, at 273 billion dollars.

What sets Twitter apart from other social networks is the concept of microblogging, i.e. the possibility of sending short public micro-messages, free of charge and instantly. It is far from being the most widely used social network (just over 300 million users compared to nearly 3 billion for Facebook) but it is popular with politicians, influencers, personalities and the media. Much more than other social networks that are used to share content (messages, photos or videos) within a group, Twitter has a public dimension that makes it an unparalleled political sounding board.

Since April 14, and Elon Musk’s announcement of an unfriendly takeover bid for $44 billion of the company’s entire capital, the fight has been underway with the company’s management for its control. After withdrawing his offer and being threatened with a lawsuit by the management of Twitter, Elon Musk resolved to buy back at the announced price, more than 6 billion more than its market valuation, all the shares. available. In fact, the company is no longer listed.

This operation does not respond to the industrial or financial logic behind mergers and acquisitions. From an industrial point of view, Twitter is a different activity and market from the companies that Elon Musk already owns (Tesla or Space X). The activity that comes closest to this is the satellite Internet service provider, Starlink, but apart from the fact that they are two communications companies, there are no obvious synergies.

When it is not industrial, the other motivation for a merger and acquisition is often financial: it is a question of buying a growing company on a buoyant market. However, in this regard, the tech sector, and that of social networks in particular, seems to be experiencing a first growth crisis. After continued growth in users and advertising revenue, there has been a marked slowdown over the past two years.

Meta, the group owned by Mark Zuckerberg, which is the parent company of Facebook, Instagram and Whatsapp, the market leader, has just announced on November 9, for the first time in its existence, a layoff plan for 11,000 employees. , or 13% of the group’s workforce.

Twitter itself, after posting profits in 2020 for the first time in its history, fell back into the red in 2021 with $221 million in losses for $5 billion in revenue. At the time of the takeover, Twitter seemed to be struggling to find a sustainable business model. Based more than 90% on advertising revenue from major brands, revenues were suffering from the too slow growth in the number of users. The media coverage of the social network was thus out of step with its financial situation.

A confusing strategy

The new owner’s strategy for raising the bar is vague to say the least. So far, its implementation has been particularly chaotic. Libertarian asserted, Elon Musk proposes a new strategic project which revolves around a simple slogan: to make the social network a vast political agora where freedom of expression would be total. Corollary of this proposal: moderation, which consists of fighting against robots, trolls, misinformation, malicious or hateful messages, risks being reduced to its bare minimum.

In the process, the billionaire announced that he wanted to drive a change in the business model through the development of a paid certification service, Twitter Blue, open to everyone for 8 dollars per month. Until then, the certification (the “ blue tick ”) was restricted to high-profile personalities, brands and news agencies after a thorough vetting process.

The offer fizzled: without real control from Twitter, a mass of fake profiles invaded the social network, multiplying the hoaxes, like this message from a fake account posing as the pharmaceutical company Eli Lily and announcing that insulin was now free.

This chaotic start made the headlines of the press and plunged advertisers into the greatest confusion. Faced with reputational risks, some major accounts immediately announced that they would stop funding Twitter. Faced with the controversy, Elon Musk was forced to suspend Twitter Blue on November 10, just two days after its launch, and now promises a new version “ concrete for November 29.

These chaotic beginnings underline that the purchase of Twitter does not respond to a financial logic but first of all to a desire for political and media power of the businessman.

Another proof of the unpreparedness of the operation and a lack of knowledge of the trade: the boiling multi-billionaire has multiplied since October 27 the sensational and often contradictory announcements. His first decision, particularly brutal, was to announce on November 4 the dismissal of half of the company’s employees and of its entire staff.

At issue: financial losses, supposed overstaffing in support services (“ There are ten people who manage for one who codes “, he had pointed out in October on Twitter) and management practices (in particular teleworking) that the new owner does not support.

Specialists immediately noted the contradiction in charging for a subscription while reducing moderation activity, which plays a key role in giving users confidence. And in this chaos, the boss also seems to be backtracking on certain layoffs, urgently asking his new teams to recall employees whose skills seemed essential.

These adventures are not without consequences on the stock market valuation of the companies owned by the businessman. Worried about the consequences of these turmoil and the cost of the debt contracted to finance the acquisition of Twitter, the financial markets have sanctioned the Tesla action which has fallen by 15% in recent days.

An instrument at the service of a desire for power

These chaotic beginnings underline that the purchase of Twitter does not respond to a financial logic but first to a desire for political and media power of the businessman. After wanting to save the planet with the electric car, then conquer space by sending manned missions to Mars, Elon Musk has multiplied geopolitical initiatives, via Twitter, not hesitating to play his own diplomatic score by encroaching on the sovereign domain of States: proposal to create a special administrative zone for Taiwan attached to China; proposal to attach Crimea to Russia and to neutralize Ukraine to obtain an end to the war; restoration of the Internet in Iran or Ukraine thanks to its Starlink network, etc.

Like Donald Trump, Elon Musk is a fan of tweeting government. Like the former president, it is through this channel that he seeks to impose his agenda, shock, provoke, even manipulate the markets and opinions. This rowdy and openly anti-establishment to play politics as a show contrasts with the discreet political action of the top executives of large companies to ensure the support of politicians.

Like Donald Trump, Elon Musk breaks the codes, confuses the action of regulators and analysts. He has repeatedly flirted with the red line. So after she announced that Tesla’s stock price was too high, the US stock market watchdog SEC investigated Musk for stock price manipulation.

In the United States, even more than elsewhere, the power of companies and their bosses is only valid as long as they play the game of the national interest on which they depend for their markets and for the tax aid from which they benefit.

Elon Musk could have been content to remain one of the most followed personalities on Twitter, with more than 115 million followersand to do the buzz in the media. His desire to get his hands on the social network challenges. Was freedom of expression so endangered that 44 billion dollars had to be put on the table to protect it? The argument seems short and questions the true motivations of the billionaire.

The highly political nature of the takeover of Twitter is not in doubt. Just look at the immediate reactions of political leaders, especially Americans: both that of Joe Biden, considering that it is a threat to democracy, and that of Donald Trump, judging that it is good news for freedom of expression.

By taking control of this politically strategic media, Elon Musk is taking a significant risk. That of damaging its image and that of its companies, of suffering the wrath of the regulators and of alienating the public principals on whom its space activities, but also automobiles or communication, are largely dependent.

Because we must never forget that in the United States, even more than elsewhere, the power of companies and their bosses is only valid as long as they play the game of the national interest on which they depend for their markets and for the tax assistance they receive. Mark Zuckerberg, who had wanted to launch his private currency, Libra, which was finally abandoned, recently had the bitter experience of it. We do not play the game of cat and mouse with impunity with the leaders of the first world power.

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