Twitter – The price of free speech

It becomes clear why Mr Musk refused a board seat.

• Elon Musk’s bid for Twitter appears to be more about his definition of free speech than financial investment as at $43bn he is really going to struggle to make a decent financial return.
• Elon Musk has made a public bid to buy the 91% of Twitter that he does not own at a price of $54.20 per share which values the company at $43bn.
• The rationale is that Twitter is but a shadow of its potential and that it has the ability to become “the platform of free speech around the globe”.
• This is will be quite difficult to live up to as countries that do not like the “free speech” that Twitter already offers simply block it from functioning.
• This has been the case for many years in China and other countries which suffer from periodic unrest will block it from time to time and there is no reason to think that this is going to change.
• Hence, I think that Mr Musk is taking aim at Twitter’s opaque and arbitrary policies with regard to what is allowed to appear on the platform and what gets blocked.
• I suspect that it is this that he will aim to change rather than any sudden change in the business model aimed at increasing the scale and size of the company.
• Increasing the size and scale of the company has already been tried many times and while the number of active users is expanding slowly, the total audience has been pretty static for a long time.
• Furthermore, Twitter has tried to move out of its core segment of microblogging to try and expand its coverage of the Digital Life pie but has had very little success in doing so.
• Twitter has a niche that it dominates but this niche is pretty small and Twitter remains unable to break out of it.
• Hence, its core value remains a direct-to-smartphone disseminator of news and opinions and a place for discussion.
• It is very good at monetising this use case which is where most of its recent growth has come from but it remains very bad at making a good profit from it.
• Without an increase in reach across other smartphone activities, Twitter’s opportunity will always be limited meaning that valuing it at $43bn is a big stretch.
• This is why investors should welcome Mr Musk’s offer as he is clearly offering to pay far more than the company is worth from a financial perspective.
• Hence, If I owned Twitter shares (which I do not) I would be more than happy to sell them to Mr Musk as he is offering investors an excellent deal.