The Financial and Economic Effects of Elon Musk Buying Twitter

 The Financial and Economic Effects of Elon Musk Buying Twitter

Written by: Evan Murphy 

On April 4th, 2022, Elon Musk announced he had purchased 9.1% of twitter. This news sent the stock prices soaring, and had people speculating. He was also offered a board seat by twitter’s board of directors, a move that would have restricted Elon to only owning a maximum of 15% of the company. Initially, Elon agreed, but later backed out. It was then on April 25th, 2022, that Twitter’s board of directors accepted Elon Musk's offer of $44 billion dollars for total control of the company, or $54.20 per share. Upon this completed transaction, twitter will likely also become a private company. Elon decided he wanted to purchase and control the entire company, and it looks like he is now doing so. But what financial effects does this major purchase have on not only the economy, but also on everyday consumers?

Although there has been an agreement for Musk to purchase Twitter, Twitter shareholders must approve the deal at the next annual meeting before it is finally official. So there is some chance that the deal could fall through, but the obstacles are seen as relatively insignificant, and Twitter expects the deal to close sometime later in 2022. But once the deal goes through, all stakeholders will be affected greatly financially. Twitter shareholders will receive $54.20 for each share of twitter stock they hold, as this is the price of shares after Elon purchased the company. This means a major cash influx for all stakeholders, especially those holding a significant number of shares. 

But Twitter’s switch to becoming a private company has other effects as well. With complete control over Twitter’s platform, Musk could make changes to put pressure on other tech companies, such as Meta Platforms Inc, the company behind the Facebook network, or other tech giants like Apple. Twitter could alter its approach to letting other companies on its platform, which could put pressure on other companies to take a similar path to Twitter.

Likewise, as a private company, Twitter would not be required to report on its financial performance in the same way that it does as a publicly traded firm. This means Twitter can be less transparent to investors in the social media and tech industries.

Elon Musk's purchase of Twitter, assuming it gets finalized, will have fairly substantial financial and economic effects. Whether more positive or negative, we’ll have to find out. But what we do know is that Twitter’s potential transition into becoming a private firm can have many effects on investors, as well as other firms. Musk will also be in full control of decision making, meaning he can easily implement new changes to twitter, revolving features, policies, etc. But to find out if these changes will have a more positive or negative impact, I suppose we’ll have to find out. 

Works Cited

Hawkins, Andrew J. “Elon Musk Buys Twitter: All the News You Need on One of the Biggest Tech Deals of All Time.” The Verge, The Verge, 16 Apr. 2022, https://www.theverge.com/23026874/elon-musk-twitter-buyout-news-updates.

jenn_elias. “Elon Musk's Deal to Buy Twitter Leaves Many Key Questions Unanswered.” CNBC, CNBC, 25 Apr. 2022, https://www.cnbc.com/2022/04/25/elon-musks-deal-to-buy-twitter-leaves-many-key-questions-unanswered.html.

Reiff, Nathan. “What Investors Should Know about Elon Musk Buying Twitter (TWTR).” Investopedia, Investopedia, 27 Apr. 2022, https://www.investopedia.com/what-investors-should-know-about-elon-musk-buying-twitter-5268075.