Elon Musk’s bid to take over Twitter is the latest twist in his love/hate relationship with the site — but Musk may not be ready for the fallout if his $43 billion offer is accepted.
The tech billionaire’s freewheeling style lends itself poorly to owning a platform that wields outsized influence on the global stage. Musk’s advocacy for absolute free speech could put Twitter in conflict with liberal democracies and authoritarian strongmen alike; the site’s broad reach means that its policy changes can help create or diffuse dangerous political situations for people around the world.
In the United States, Twitter ownership would thrust Musk into the roaring debate over Section 230, the federal law governing free speech on the internet. And it could once again pit him against federal regulators, who have already taken action against Musk for market-moving tweets about his stake in the car company Tesla.
There are signs that Tesla investors are wary of Musk’s pursuit of Twitter; the car company’s share price fell roughly 3.5 percent on Thursday in response to news of the Twitter bid. Musk’s other major investment, commercial space company SpaceX, is privately held.
One immediate issue is Musk’s failure to notify the Securities and Exchange Commission that he was purchasing a 9.2 percent stake in Twitter earlier this month; in doing so, he was able to buy more shares at lower prices, saving millions of dollars.
“It could be a huge issue,” said Howard Fischer, a former senior trial counsel at the SEC and a partner at law firm Moses & Singer. “It is really not hard to fill out these forms, and for someone who is as monitored as Musk is, for him to not fill this out is pretty astonishing.”
Musk previously ran afoul of the SEC in 2018 for tweeting he was planning to take Tesla private, which affected the company’s stock price. Musk did not take Tesla private and later settled with the SEC for $40 million. He also agreed to have lawyers review any of his tweets related to Tesla before posting them.
In the case of Musk’s recent Twitter stock purchase, Fischer said the billionaire could face a substantial SEC penalty if the agency finds him liable for manipulating the market and engaging in fraudulent schemes by not disclosing his investment.
“It could be a multibillion-dollar enforcement,” said Fischer. “For a person who has billions of dollars, and apparently doesn’t care, he could see this as a license fee more than a penalty.”
In a regulatory filing Wednesday, Musk submitted a bid to purchase Twitter for $43 billion, or $54.20 per share. The move comes about two weeks after Musk registered as a passive investor, became the company’s largest stakeholder, was offered a board seat, rejected it and was sued over his delayed disclosure of his Twitter stock purchase.
After a weekend of tweeting criticisms of Twitter, then deleting the tweets, Musk posted a meme of “Better Call Saul” character Saul Goodman, with the caption “In all fairness your honor, my client was in ‘goblin mode.’” He later deleted the tweet. The term loosely refers to embracing depravity.
“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” Musk wrote in the filings describing his purchase bid. “However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”
The whiplash of the last 10 days raises questions about how serious Musk’s offer is. In the filings, he said he is “not playing the back-and-forth game” and has moved “straight to the end.” While Musk says it is not a threat, he also told the company he would reconsider his position as a shareholder if its board rejects his offer.
The offer itself is weaker than it could be, according to observers; Musk is offering to buy the company for a price well below the company’s 52-week high share price of $73.34. Some have speculated that the offer is a way for Musk to end his involvement with Twitter. “Not a serious offer, but cloud cover for sale of shares,” tweeted Scott Galloway, a marketing professor at New York University.
It’s also unclear how Musk would finance the deal. When asked in a live interview Thursday at TED 2022 if he had secured funding, he merely said that he had the assets. The fact that he may have violated the securities laws is only going to make it more complicated.
In a statement Wednesday, Twitter confirmed it had received an “unsolicited” and “non-binding” proposal from Musk.
“The Twitter Board of Directors will carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and all Twitter stockholders,” said the statement.
The company is expected to fight Musk’s takeover attempt by putting in place a “poison pill,” a tactic that would flood the market with new shares of Twitter if any individual or group buys 15 percent or more of Twitter’s shares.
Speech is not always free
Twitter’s global reach means that it must deal with a range of government views on free speech.
The company moderates certain content and blocks users based on various standards, including a purge of high-profile QAnon conspiracy theorists. While it hasn’t stopped supporters of the movement from being on the ballot in 26 states, it did cull their reach.
Such policy decisions have sometimes put the company in conflict with governments as well as users. Russia, for example, passed a law that took effect on Jan. 1 requiring social media sites with more than 500,000 daily Russian users, which includes Twitter and other large platforms, to have a legal entity or local subsidiary based in Russia. Critics see that as a way for the government to threaten companies and employees in the country if they so choose. In India, the government has threatened to arrest Twitter employees in the past over unlocking critics’ accounts. And in Myanmar, it became apparent that social media helped fuel a genocide.
At the TED 2022 conference, Musk said he thinks people “should be able to speak freely within the bounds of the law” and that Twitter should adhere to laws of the countries it’s in.
But he also said that he would err on the side of letting speech exist rather than taking action to moderate tweets.
Ángel Diaz, a lecturer at the University of California, Los Angeles, School of Law who has written reports on content moderation and marginalized communities, said that notions of free speech around the world are incredibly complicated. Musk will be stepping into a number of different issues that will probably challenge his current views.
“Elon Musk is not the first influential person who has notions of free speech that quickly run into the reality that there isn’t a one-size-fits-all across the world,” said Diaz.
In his TED 2022 interview, Musk said he’d want to make Twitter’s algorithm open source and make the site display whether the algorithm has promoted or demoted a tweet.
Diaz said that statement, which alludes to “shadow banning” — when Twitter’s algorithm effectively hides a tweet — and Musk’s preference for getting rid of permanent bans for the most severe violations of Twitter’s site rules are both dog whistles to conservatives’ perceptions that Big Tech is biased against them. It also hits on the strong desire of many conservatives for Twitter to allow former president Donald Trump back onto the platform; many have publicly expressed hope that Musk would use his stake in Twitter to overturn Trump’s ban.
“All of these ideas, which are framed around this being more open for everybody, it’s probably going to be reflected in terms of powerful users having more protections for them to understand, for political figures and other influential accounts to know when they’re being downranked, or that even if they chose to break the rules with impunity, no ban would be permanent,” said Diaz.
While platforms like Twitter are considered by some a public square, Diaz contends they’re really controlled by a few people.
“We are stuck with how they view online speech and online community building,” he said. “And that is to the detriment of ordinary people, but certainly the detriment of marginalized communities.”
Fischer said Musk’s focus on Twitter illustrates a fundamental transformation of the equities market from a model where people invest based on a business’s fundamentals and key performance metrics to a market where tribal identity rules. In that model, people buy shares in a company to indicate they’re part of the same group. Other recent examples include Reddit users organizing to buy stock in GameStop and AMC en masse.
“Rather than looking at fundamentals, people are looking at personalities,” said Fischer. “That could work for a while, but it presents some serious systemic stability issues — ultimately, historically, companies that aren’t based on fundamentals tend to suffer falls. You can’t keep this going forever. And who is hurt?”
For now, Musk is plowing ahead.
“Twitter has extraordinary potential,” he said in his latest SEC filing. “I will unlock it.”
This article was originally published Thursday. It has since been updated. Thanks to Lillian Barkley for copy editing this article.