Elon Musk’s Desire to Take Twitter Private
Elon Musk, the founder of SpaceX and Tesla Inc., is an outspoken person, who often uses Twitter as a platform to make announcements and have conversations with people. On August 6, 2020 Musk tweeted “Let’s take Twitter private”, which sparked debates and numerous questions worldwide. What drove him to make such proclamation? Why would Musk, who has had such success with the public market, want to take Twitter into private hands?
To understand Musk’s motives, it is necessary to take a look at the market. Following a 17% dip in Twitter’s stock, Musk announced his desire to take the company private. Other well known figures, such as Mark Cuban, echoed the sentiment behind the move. The prevailing rationale is that, by taking the company private, Musk would be able to better focus on the brand’s growth and assets rather than catering to the demands of various shareholders. When a company is private, it is freed from having to post quarterly earnings and other financials, which can be a benefit for a company trying to rebuild.
The strategy seems to be that by delisting their stock, Musk is positioning Twitter to make a much awaited comeback in its user base and therefore its stock performance. Twitter typically runs on its innovative edge, using analytics and machine learning to refine its platform and speaking to users on a deeper level. Making the company private would give Twitter more control over its user data, while freeing its creators from the restraints of public offerings. Twitter could also make decisions more quickly, without relying on the judgement of so many stakeholders.
Without the pressure from stockholders, Twitter could also bring in new talent to help drive innovation and put resources into projects which generate more engagement with the user base. Not only that, but going private could act as a safe haven for influencers, celebrities, and the public in general. Being a private company, Twitter could have more control over what content is allowed on the platform and dedicate more resources to moderating conversations.
It is also possible that Musk could be making a move to be on top of the Twitter market, essentially guaranteeing that his stature as a powerful technology leader is preserved. By having a greater control of the platform, Musk could use the network to share his visions and passions in a more subtle manner than before.
Would Taking Twitter Private be a Prudent Move?
Experts believe that taking a company private is typically a risky venture, even for leaders of the caliber of Musk. Though it may free the company from many of its most costly responsibilities, it is a move not to be taken lightly. Companies that go private can experience a loss of liquidity and a decrease in overall capital, both of which could hurt Twitter’s chances for success over the long term. Whilst taking Twitter private might bring short-term gains, there is more to consider.
Whilst it’s true that a move towards a private market could give Twitter more control over its data, it may also place Twitter in the spotlight of regulators and industry watchdogs who are attempting to limit the power and influence of tech companies. As a leader in the social media and consumer data space, Twitter’s management team may not be comfortable with the scrutiny that could follow the transition.
In addition, the road to going private is not an easy one, meaning Twitter could be tied up in red tape for what could be a long time. Factors such as acquiring the proper funding to purchase all of Twitter’s shares, obtaining the cooperation of Twitter’s current investors, as well as satisfying SEC regulations will all have to be met before a transition to private ownership is even possible.
The private move could also set a precedent for investors, saying that Silicon Valley ideas can be taken back into the private markets, instead of the conventional IPO model seen by companies such as Google and Uber. Though it may be a great case study for other companies, it would also be a difficult decision for Twitter to make.
In the end, it will be up to Twitter’s own board to analyze the available evidence and make a decision. In the meantime, Musk’s desire to take Twitter private has served as a call to action for the company’s board, which is working to assess the situation and what its impact on the company’s future could be.
The Value of Twitter Privatisation
The value of taking Twitter private is power. In other words, Twitter’s management team would have full control over their decisions and the direction their platform should take. By removing itself from the public market, Twitter would be freed from the expectations of its stakeholders and shareholders, who may not always have the platform’s best interest in mind. Instead, Twitter would be able to restructure and make decisions that not only lead to better engagement among users but are driven by the company’s betterment and growth.
In the short term, taking the company private could provide an opportunity for Twitter to reset and stop the financial bleeding that its stock has been experiencing since its peak. In the long term, it could give the brand a chance to focus on its core values, such as user privacy and data security, as well as analytics and machine learning, in order to build a better product.
Additionally, the move could help address some of the controversy that has been surrounding Twitter since its inception. Going private could give the platform more freedom to control the types of conversations that are happening on its platform, allowing it to become more inclusive and while ultimately protecting users and the brand’s reputation.
The Challenges of Going Private
A move to privatise Twitter, however, would not be without its challenges. Beyond the financial costs of taking a company private, there are the potential public relations ramifications to consider. By becoming a private company, Twitter would have to re-evaluate its methods of transparency and disclosure.
Communications and interaction between Twitter and its users would become more opaque, as the company would no longer be required to post earnings or regulatory filings as it currently does. This could all combine to create a distrust between the brand and its users, who rely on the platform for news and conversations.
In addition, whilst the transition might free Twitter from the expectations of its shareholders, it does not free it from its regulatory responsibilities. Though Twitter could be left to its own devices to make decisions organically, it still must comply with the laws and regulations that apply to private companies.
Musk’s Request Sparks Controversy
While there are many potential benefits to taking the platform private, the Twitter community has been largely split on the issue. Investors have expressed concern that a private model could threaten the growth of the platform and its investors, who may now be stuck in a privatisation limbo.
The public opinion has been largely in favour of going private, with many believing that it would give Twitter a chance to refocus its business model and build a better product for its users. However, some investors have expressed concern that it could negatively impact the company’s ability to innovate, as private companies often don’t have access to the same resources and capital that public companies do.
Will the Move be Successful?
Despite the controversy and mixed opinions, the move is being taken seriously by the Twitter board and its management team. But whether or not the move is actually successful remains to be seen. Taking a company of Twitter’s size and stature private is a tall order and could ultimately have huge ramifications for the company’s future.
Ultimately, the decision will depend on many factors, such as the ability of Twitter’s management team to rally the necessary investors and capital and obtain the cooperation of the current shareholders. Until then, the public will have to wait and see what becomes of Musk’s request.
