Elon Musk has bought Twitter for $44 billion. Huge purchases like these have substantial effects which ripple throughout the commercial sector. It is important to closely analyse this acquisition to ascertain its influences on the wider world.
There are several factors surrounding this purchase but the most important relate to money. Musk took out loans equating to $13 billion with an annual interest of $1 billion. Additionally, Musk has pledged billions of dollars in Tesla shares as collateral for these loans. The financial pressure of such large annual interest is compounded by the fact that, when the purchase occurred, Twitter was not profitable and reported a loss of $220 million in its last financial report. Twitter’s main source of revenue is advertising which generates 85% of its income.
However, Musk’s campaign for ‘free speech’ has left advertisers anxious due to the potential rise in hate speech and misinformation; in fact, 12 hours after Musk’s acquisition, use of the n-word on the platform rose by 500%.
This caused advertising giants like Interpublic group to advise clients to pause advertising on Twitter. Claire
Atkins, co-founder of the AdTech watchdog Check My Ads, goes as far as to suggest that ‘advertisers are bracing to leave’.
This potential withdrawal of advertising revenue has inspired Musk to charge $8/m for a verification checkmark. This has largely been a disaster, giving rise to numerous ‘parody account’s’ attempting to masquerade as actual company’s accounts. One significant case of this caused a drop of billions in Eli Lilly and Company’s market cap as a tweet from a fake Eli Lilly and Company account proclaimed, ‘We are excited to announce insulin is free now’.
This mismanagement has created an air of incompetence surrounding Musk and has
affected his other companies enormously, with Tesla losing more than $100 billion of
market cap. This is dangerous for Tesla shareholders as, if the value falls further,
Musk may have to sell his stock devaluing it further which could lead to panic selling.
By Luke Davies, BeComAware Student Ambassador.
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