Elon Musk Has a Fascinating Idea to Make Money on Twitter
Elon Musk hears criticism and never hesitates to respond to it.
Like a boxer taking the blows of his opponent in the first rounds of a boxing match, the billionaire tends to have phases of observation. He observes his opponents to try to find their weakness from him before striking the fatal blow.
The whimsical CEO of Tesla (TSLA) – Get Tesla Inc Report has made a takeover bid of $44 billion, or $54.20 per Twitter (TWTR) – Get Twitter, Inc. Report share, to buy the social network which he describes as the “de facto town square” of the internet.
Musk explains that his decision is motivated by the desire to restore the principles of free speech on the platform. The deal has alarmed Democrats who say they fear the world’s richest man will handle the platform to conservatives, and especially extremist and far right voices. They also say they fear an explosion of hate speech in the name of free speech.
Musk has so far said that his Twitter will tolerate comments that fall within the legal scope and respect current legislation in each country where the social network operates. Basically, as long as something doesn’t break the law, it will be accepted on Twitter.
The transaction also raises questions about its financing. The billionaire managed to secure $46.5 billion in loan from banks and margin loan guaranteed by his Tesla shares. And this part which represents $21 billion is the one on which all eyes are currently focused. Musk, who sold millions of Tesla shares for just over $8.5 billion, wants to reduce this cash contribution tied to his personal wealth, according to Reuters.
The new financing could come in the form of preferred or common equity. Musk is trying to convince certain major shareholders of Twitter, hedge funds and wealthy individuals to provide preferred equity financing for the acquisition.
The billionaire is also trying to convince some shareholders not to sell their shares as part of the offer but to remain shareholders of the group even when it will be delisted.
Jack Dorsey, the founder and former CEO of Twitter, is among the shareholders Musk reportedly told about his plans.
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Musk himself seemed to confirm this information by commenting on a Twitter post that mentioned the Reuters story.
“Also, as mentioned before, we will try to keep as many shareholders as legally possible in privately held Twitter!” said the billionaire whose net wealth is estimated at $258 billion as of May 3, according to the Bloomberg Billionaires Index.
A Fee for Commercial/Government Users
Beyond funding, the other question that many observers are asking is what economic model Musk intends to adopt for Twitter? tycoon had mentioned the idea of removing advertising from the platform, and in particular for subscribers to Blue, a subscription service offered by Twitter that gives users access to premium features, like the ability to cancel a Tweet. These features are available wherever you use the Twitter account from which you subscribed.
“Everyone who signs up for Twitter Blue (ie pays $3/month) should get an authentication checkmark,” Musk suggested on April 9, referring to one of the new products. “Blue already has a modifiable 20 second time to edit tweet feature,” I added.
Musk has just unveiled the first ideas of the economic model he intends to put in place once he has finalized the acquisition of Twitter in October if all goes as planned. The entrepreneur indicates that the platform will remain free for ordinary users. But on the other hand, Twitter will charge a slight fee for businesses, companies and government users.
“Twitter will always be free for casual users,” Musk told his more than 90 million followers on Twitter on May 3. “But maybe a slight cost for commercial/government users.”
The billionaire did not give further details: How much will this slight cost be? Who falls into the government category?
Twitter Blue currently costs $2.99 per month. However, Twitter mainly derives its revenue from advertising.
Much speculation currently surrounds Musk’s intentions regarding Twitter. The Wall Street Journal just reported that the mogul intends to take the firm public again with an IPO within the next three years.