Putting an end to weeks of uncertainty, Twitter on Monday, 25 April, finally agreed to sell itself to Tesla CEO Elon Musk, who agreed to pay $54.20 per share and take the company private.
The deal is valued at $44 billion. Musk doesn't have that kind of money lying around since most of his wealth is tied up in Tesla, so he went to great lengths to arrange finances, including taking out loans against his equity and maybe even selling some of it.
It's a risky move.
Twitter isn't very good at generating profits, and Musk selling some of his shares could potentially have a negative effect on the other companies he leads. From a business standpoint, the money could have been better invested elsewhere.
So, why did he buy Twitter?
To make changes, if you go by what he has said. Musk thinks that Twitter is too aggressive in moderating speech. He wants to "unlock the platform's potential" and make it a free speech haven.
Here's what might be in store for Twitter in the near future:
Free speech is at the center of Musk's agenda.
He has often expressed concern that Twitter, which he views as the "de facto public town square," is too aggressive with its content moderation.
He kicked off the conversation about him purchasing Twitter when he invited a poll asking users if they believe Twitter rigorously adheres to free speech principles (most said "no").
Later, while announcing the agreement, he said that “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated."
Under Musk's leadership, Twitter can expect substantial easing of its content moderation policies.
It's a polarising move. Some users celebrated this change, while others expressed concern that this would encourage hate speech.
Musk doesn't seem to mind. According to him, "a social media platform’s policies are good if the most extreme 10 percent on left and right are equally unhappy."
Twitter might also see its algorithm, which influences which posts users see first, become open to public inspection, in the interest of transparency and to "increase trust."
At a recent TED conference, Musk said that he will make Twitter's algorithm an open-source model, allowing users to scrutinise the code and understand why they're seeing certain posts.
Musk said that an open-source algorithm will help prevent “behind the scenes manipulation” and avoid a situation where tweets are "mysteriously promoted and demoted with no insight into what’s going on.”
War on Spam
"A top priority I would have is eliminating the spam and scam bots and the bot armies that are on Twitter," Musk said at the TED conference. He also said that if he had a Dogecoin for every crypto scam he saw on Twitter, he would have 100 billion Dogecoin.
Bots are automated, software-controlled accounts designed to replicate how an authentic user behaves on Twitter. They can be used to, among other things, lure people into scams or promote certain posts.
Musk plans to introduce measures to better authenticate users on the platform and weed out the bots. It's unclear how he plans to do this.
"I also want to make Twitter better than ever by enhancing the product with new features," said Musk while announcing the deal.
One of these "new features" is an edit button which will allow users to make changes to their tweets after they have posted them.
Musk floated the idea in a Twitter poll after which Twitter announced that it had already been working on such a feature and plans to begin testing the feature with Twitter Blue subscribers in "the coming months."
Apart from this, Musk might also bring in longform tweets since he has previously expressed that Twitter is "way overdue" for such a feature.
Management Reshuffle & Business Model
Apart from theses changes, Musk's leadership might also bring in management changes. There are speculations that CEO Parag Agrawal and other top management might be let go after the deal is completed.
Several employees also might leave due to conflicting ideologies.
Musk, who has nurtured several businesses over the years might also bring changes to the business model, leaning away from ad revenue and relying more on Twitter Blue, the premium subscription service.
"The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive," Musk said in a now-deleted post.
Twitter currently brings in limited revenue compared to other social media giants due to its small user base.
Could the Deal Still Fall Through?
It's unlikely, but it could happen. The deal is subject to several closing conditions, including the approval of Twitter stockholders, regulatory approvals, and Musk actually coming up with the money.
It is worth noting that, according to the filings, Musk will get $25.5 billion in loans from lenders, but will have to arrange $21 billion on his own. There were no details about where this money will come from.
Presumably, Musk could sell some of his equity in, say, Tesla or SpaceX, or he could get help from private equity firms who might be more optimistic now that the deal is finalised.
If it does fall through, Twitter will be back to square one and Musk will have to pay a hefty termination fee, according to Bloomberg.
However, assuming that the deal is completed without a hitch, Twitter is likely in for some major changes.