Where It Started: Musk Buys Twitter
Elon Musk initiated his bid for Twitter on 14 April 2022 and closed the deal on 27 October 2022. In commercial law, closing marks the point where conditions precedent are satisfied, and ownership formally transfers. Musk paid $54.20 per share in cash, taking Twitter private for roughly $44bn. Financing came from a mix of debt and equity, including $13bn in bank loans, Tesla shares, personal cash, his existing Twitter stake and equity investors such as Larry Ellison and Prince Alwaleed bin Talal.
This takeover illustrates the central role of corporate law firms. Skadden, acting for Musk, would have drafted and negotiated the share purchase agreement and overseen due diligence. Finance lawyers would have prepared loan agreements and coordinated the debt financing structure. Due diligence likely flagged concerns about valuation, but clients often override caution when pursuing strategic deals.
Twitter’s balance sheet already showed strain. With high debt, negative cash flow and an overvalued purchase price, Musk entered the company facing immediate financial pressure. This set the stage for a rescue attempt.
Twitter’s Cash Flow Problems and Musk’s Rescue Measures
Musk responded with sweeping layoffs, reducing Twitter’s workforce from roughly 7,500 employees to about 1,500. Advertising revenue declined as marketers reacted to uncertainty and relaxed content moderation. Twitter generated net cash of $126mn in Q1 2022, falling to $30mn in Q2.
Musk introduced new revenue measures. The $8 monthly blue‑tick subscription drew widespread criticism. Twitter pursued regulatory licences to expand into payments and commerce, appointing Crawford as chief executive of Twitter Payments. Musk also introduced a paywall for Twitter’s data, with pricing reportedly starting at $42,000 per month for developers. Major customers such as Microsoft and Intercom have already withdrawn from Twitter’s data services.
These changes raise strategic questions. Twitter must decide which customers it wants to retain and which it aims to attract. A clear know‑your‑client approach will be essential for long‑term stability.
Twitter Today and the Road Ahead
Musk’s appointment of Linda Yaccarino as chief executive marks a significant shift. Investors and bankers have pushed for new leadership after layoffs left Twitter with lean teams and recurring technical issues. Tesla investors also welcomed the move, hoping Musk will refocus on Tesla after a 30 per cent decline in its share price over the past year. Tesla shares rose by 2 per cent following the announcement.
Critics highlight Yaccarino’s ties to the World Economic Forum, suggesting potential tension with Musk’s self‑described “freedom absolutist” stance. This underscores how political dynamics shape corporate strategy.
Regulatory pressure is also rising. The EU has urged Musk to hire more human moderators and fact‑checkers. The Digital Services Act requires Big Tech companies to police illegal content more aggressively. Non‑compliance could result in fines of up to 6 per cent of global turnover.
Meanwhile, alternative platforms are emerging. Bluesky, backed by Twitter co‑founder Jack Dorsey, has gained attention but remains in beta with about 50,000 users. Its decentralised model challenges traditional moderation structures. Whether it can scale remains unclear.
Twitter’s business strategy is still evolving. Its financial future is far from settled.
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