Elon Musk Just Highlighted His Biggest Dilemma at Twitter

What is Elon Musk up to at Twitter? Over the weekend, just days after finalizing his purchase of the social-media platform, he retweeted to his 112.6 million followers an article containing baseless right-wing rumors about the vicious assault on the eighty-two-year-old husband of Nancy Pelosi. After assuring Twitter advertisers last week that he wouldn’t allow the social-media site to become a “hellscape,” the world’s richest man promptly raised fears of precisely this outcome.

One interpretation is that the Pelosi retweet, one of about a dozen postings Musk made over the weekend, was simply Musk being Musk. He’s long revelled in using Twitter to cause controversy and attract attention. “Aren’t you entertained?” he said at a dinner with the Financial Times a few weeks back. “I play the fool on Twitter and often shoot myself in the foot and cause myself all sorts of trouble,” he explained. “I don’t know, I find it vaguely therapeutic to express myself on Twitter. It’s a way to get messages out to the public.” But there is nothing funny or defensible in amplifying misinformation from a little-known Web site, especially when the police have already released information that contradicted it. (On Monday, the Feds charged a forty-two-year-old California man, David Wayne DePape, with assault and attempted kidnapping.)

Musk’s ill-advised tweet vindicated the decision by General Motors, a rival of Tesla’s, to pause its advertising on Twitter until the platform’s new direction becomes clearer—and the announcements by some celebrities with large followings to stop using their accounts. The furor over the tweet also overshadowed Musk’s announcement that he would appoint a “content moderation council with widely diverse viewpoints,” and that “no major content decisions or account reinstatements will happen before that council convenes.” So, perhaps, no immediate return for Donald Trump.

If nothing else, the outcry over Musk’s tweet surely demonstrated to him that there is no separating the editorial and financial challenges he faces at Twitter. Despite his public insistence that he bought the company to protect free speech, not to make money, there is a theory that he sees the prospect of making another financial killing. In Silicon Valley and on Wall Street, it is widely believed that Twitter has been badly mismanaged, and that there is an opportunity for Musk to restructure its operations and boost its revenues. “I think he’ll make a lot of money in Twitter,” Chamath Palihapitiya, a venture capitalist and a former Facebook executive, told the Times.

Yet Musk’s Twitter is also facing enormous financial challenges. Long the poor relative of the big social-media companies—Facebook and Google—it has barely turned a profit since 2019. In the recent past, at least, its cash hoard was roughly as large as its debts. No longer. In financing his forty-four-billion-dollar acquisition, Musk is reportedly loading another thirteen billion dollars in debt onto Twitter, which, in 2021, posted operating losses— before interest, taxes, and depreciation—of $221.4 million. In the first six months of this year, Twitter’s operating earnings turned positive, to the tune of $243.3 million. But this figure is nowhere near a billion dollars, and the company, like its competitors, is now facing a precipitous decline in social-media advertising.

In this forbidding economic environment, Musk recently acknowledged that he was “obviously overpaying” for Twitter. By how much? Since mid-April, when he announced his takeover offer, the stock prices of Google, Facebook, and Snapchat have tumbled—by roughly a quarter, fifty-five per cent, and seventy per cent, respectively. It seems reasonable to assume that, absent Musk’s takeover offer, Twitter’s stock would have dramatically declined as well. On Friday, an analyst at Wedbush Securities described Musk’s takeover “as one of the most overpaid tech acquisitions in the history of M&A deals on the Street.”

As long as the recent fall in Tesla’s stock price doesn’t turn into a collapse, Musk, whose net worth Bloomberg estimates at more than two hundred billion dollars, can afford to run Twitter at a loss for an indefinite period. But he also has to consider the interests of outside investors who helped to pay for the takeover—they reportedly include a Saudi prince, a couple of big Silicon Valley venture-capital firms, and Larry Ellison, the co-founder of Oracle. Big banks put up thirteen billion dollars in debt financing as well. Even if Musk isn’t too concerned about getting his money back, these other participants in the Twitter takeover certainly will be.

Hence the speculation that Musk is about to announce huge cuts in Twitter’s workforce and make verified Twitter users pay twenty dollars a month or lose their coveted blue checks. In the short term, moves like these could reduce Twitter’s costs and increase its revenues, and that could conceivably open the way for a return to the public markets in a few years’ time, via an I.P.O. But, with the company’s advertising revenues under threat, some of its users already fleeing, and its new interest burden eating away at its budgets, that is very much a best-case scenario. If Musk does try to run Twitter on the cheap, by, for example, slashing its content-moderation division, he’ll likely stumble into further controversies about its content that, in a destructive cycle, further alienate advertisers and users. By his own actions over the weekend, he inadvertently highlighted his dilemma.

At a TED conference earlier this year, the technology journalist and publisher Chris Anderson recalled how Musk had told him, shortly before launching his takeover bid, “I do not want to own Twitter—it’s a recipe for misery, everyone will blame me for everything.” For some reason, Musk changed his mind. Now that he has owned Twitter for a few days, it wouldn’t be surprising if he is already having some second thoughts. ♦


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