Elon Musk’s Pivot: Why He Removed His Bid for Twitter’s Board Despite His Plans to Buy the Platform Entirely

Elon Musk recently announced his intention to step back from his proposed bid to join Twitter's board of directors, a move that has left many analysts and observers puzzled.

Regulatory Filings and Musk’s Plans

A recent financial filing by Musk highlighted that he would not be joining the board. The new filing mentioned that he would maintain the right to 'express his views' on Twitter's business products and services via social media. As of the filing, Musk held a 9.1% stake in Twitter.

Elon Musk's Grand Vision for Social Media

Musk is driven by a vision of Twitter as a platform where free speech can thrive. His approach to achieving this goal is radical - rather than simply investing or joining the board, he intends to acquire the entire company and overhaul it. This strategy would enable him to combat the alleged influence of neo-Marxists on the platform and introduce a more liberal and unbiased landscape.

Musk declared his disinterest in merely buying Twitter. His motive was primarily to gain media attention and showcase his capability to acquire a significant social media company. When Tesla's stock began to decline shortly after his initial investment announcement, Musk decided to reevaluate the economic viability of his plans.

Market Conditions and Financial Realities

Apart from Tesla's stock downturn, Musk is now examining the financial implications of his proposed 44 billion dollar deal, particularly considering the number of fake accounts on the platform.

Twitter has stated that less than 5% of their accounts are fake. Musk, however, may be questioning whether the value of the platform is justified at 44 billion, given the impact of these fake accounts on the stock market and tech sector valuations.

The argument can be mathematically simplified to point out that if 4.5% of Twitter's accounts are fake, and Musk calculates that these fake accounts are worth 4.5 billion dollars, then the fair market value of Twitter could be reduced by that amount, making the deal less economically attractive.

The key to Musk's calculation revolves around the financial performance of Twitter. With an EBITDA of 1.4 billion dollars last year, Musk might be looking at the high buyout price as a significant financial risk. He could be weighing whether the one-time cost of acquiring Twitter makes sense in light of the ongoing interest payments he would have to make.

Conclusion

While Musk's pivot from joining Twitter's board to considering an outright acquisition is a testament to his strategic flexibility, it also highlights the complex interplay between intention and financial reality in the tech industry. Musk's actions now are not only influenced by his vision for free speech but also by the practical considerations of market conditions and corporate valuation.