What is going on with Twitter?

What is going on with Twitter?

23 June 2022 |

Social Media

What’s happening?

On April 4 2022, Elon Musk revealed in a filing to the US Securities and Exchange Commission (SEC) that he had acquired a 9.2% stake in Twitter, valued at $3 billion AUD. With this acquisition, Musk became Twitter’s largest shareholder. Later that month, Musk submitted an offer to buy the company outright for $44 billion which was approved on April 25.


Fast forward to May 13. Musk announced that the deal was temporarily on hold while he investigated Twitter’s claim that less than 5% of the site’s user base was made up of fake accounts. He alleged that Twitter had underestimated this number, and on June 6th threatened to abandon the transaction on this basis. 


What are the issues?

In spite of Musk’s threats to walk away, it appears the deal is still going ahead. In an interview for the Qatar Economic Forum earlier this week, Musk outlined that three key issues needed to be resolved before it can proceed. 


Aside from the ongoing issue of fake accounts, Musk noted that he still needs to secure the remaining capital for the acquisition through debt financing. He has committed to paying $33.5bn in cash for the company and received $7.1bn in equity financing commitments from investors. The remainder of the purchase price will come in the form of bank loans, but exactly how this will play out remains unclear. 


The final hurdle is that of shareholder approval, which is expected to be settled in late July or early August. However, as the board unanimously recommended that shareholders approve the sale earlier this week, it is looking likely that approval will be secured.


What does a Musk-Helmed twitter mean for advertisers? 

Advertisers have a mixed response to the prospect of a Musk-helmed Twitter. On one hand, as a technology magnate, Musk has stated that he is open to exploring more innovation on the platform. As the platform notoriously lags behind its peers in terms of innovation, especially in its advertising offerings, Musk’s input could allow the platform to compete with the likes of Meta and Tiktok.

On the other hand,  Musk’s intention to loosen content moderation on the site could make it an unattractive forum for advertisers looking to ensure brand safety. Further, Musk has previously stated that he “hates advertising”, which may cause an issue as ads account for 90% of the website’s revenue. This could mean that Musk may eschew advertising in favour of subscription concepts, like Twitter’s new offering Blue.