Why Elon Musk Wants to Buy Twitter — Power and Money

Mohit Oberoi, CFA - Author
By

Apr. 19 2022, Published 8:24 a.m. ET

For the most of April, Elon Musk and Twitter have been making headlines. Long-time Musk watchers aren't surprised at the drama since it’s the typical “Musk way.” After revealing a 9.1 percent stake in the microblogging site, Musk offered to acquire the company and take it private.

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Musk is now stacked against Twitter’s board, which has introduced a “poison pill” to block his offer. The showdown between Musk and Twitter’s board might continue. Musk has suggested that he might make a tender offer for the company. Why does Musk want to buy Twitter?

Musk gave an official response on why he wants to take Twitter private.

In his SEC filing, Musk said, “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.”

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However, the Tesla CEO added, that he has “realized” that Twitter “will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.” Musk said that he wants to “unlock” the “extraordinary potential” of the company.

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Musk wants Twitter for commercial reasons too.

Twitter’s monthly users are a fraction of Facebook. Many people don't think that the company has been able to realize its potential. While Musk has said that he isn't interested in the commercials, buying Twitter makes economic sense for the world’s richest person.

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The spike in Digital World Acquisition stock, which is set to merge with former President Donald Trump’s TMTG (Trump Media & Technology Group), was a good enough indicator of the economic potential of a social media company like Twitter.

As Musk rediscovers himself as a “free speech absolutist,” he can attract and retain the conservative user base on Twitter, which has been moving to other social media platforms that are friendly to the conservative cause.

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Twitter is Musk’s marketing tool.

While fellow carmakers spend generously on marketing and advertisements, Musk uses Twitter as Tesla’s marketing tool. Many of his over 82 million Twitter followers are potential Tesla customers. Given Twitter’s strict approach to blocking users, Musk wouldn't want to let go of the low-cost and highly effective marketing medium.

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Twitter is also Musk’s favorite pastime.

Twitter seems to be Musk’s favorite pastime too and he's an avid Twitter user. He brilliantly uses the platform to connect with his fan base. This massive fan base is what separates Musk from other business leaders.

Looking beyond the numbers, social media platforms like Twitter help in setting up narratives. Those who own social media platforms can try to influence public behavior and perception.

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Also, Musk might be pre-empting Trump’s Truth Social, which has been facing multiple issues. Musk hasn’t been on the best terms with President Joe Biden. He has been grudging about not being invited to the White House to discuss scaling up electric vehicle production while companies like Ford and General Motors were. Buying Twitter would give Musk more of a voice to conservatives since Twitter has been blocking some conservative accounts.

Musk is a smart businessman and Tesla’s almost $1 trillion market cap is a testimony to that. Buying Twitter makes perfect sense for the world’s richest person both economically as well as in controlling the narratives. By buying Twitter, Musk would become even richer and more powerful.

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