In the immediate fog of Twitter’s acquisition by the “free speech absolutist” Elon Musk, all the predictions that the platform would become a bastion of hate and bad vibes seemed to be coming true. There was the radio host Mark Levin, who returned from self-exile. Then Tucker Carlson tweeted “We’re back,” after an apparent one-month hiatus. “Free at last! @elonmusk take off my shadow ban homie …,” tweeted Ice Cube, though it’s unclear what’s going on with his account, or why. (Donald Trump, who was “permanently” removed two days after the assault on the Capitol for the risk of inciting violence, says he won’t come back, but who knows if he can resist an old flame calling him home again.)
“Twitter is the closest thing we have to a global consciousness,” Jack Dorsey, the Twitter co-founder and former CEO wrote in a thread following the deal’s announcement with a link to Radiohead’s “Everything in Its Right Place.” Private ownership, he went on, is a means of protecting that consciousness. “Twitter as a company has always been my sole issue and my biggest regret. It has been owned by Wall Street and the ad model. Taking it back from Wall Street is the correct first step.” The problem with his statement here is that Wall Street — meaning a handful of banks, rather than the shareholding public — now have even greater control of Twitter than ever before, and Musk will have to answer to people such as James Gorman, the CEO of Morgan Stanley, if he allows Twitter to become a hellsite.
Twitter sees itself itself as the town square of the world — where, unlike TikTok, unpleasant and controversial topics are what make it necessary. But it’s also a business. Take a look at the company’s statistics on its content moderation: Twitter suspended 1.2 million accounts, and deleted 5.9 million pieces of content during the first half of 2021, the most recent time period available — and the most active period of pruning who gets to speak, and what gets said, in 280 characters. It’s not the only platform that has to balance those priorities: As of last year, Facebook was spending some $500 million a year to pay faraway, desperate content monitors to flag posts. There’s a reason for that: It wants people to keep coming back. Now that is Musk’s concern too.
It’s true that should Musk close this deal, Twitter will be privately owned by the Tesla CEO. But just because Musk owns Twitter doesn’t mean it all of a sudden becomes Willy Wonka’s factory, cut off from the outside world and immune to the rules of business. More than $25 billion is financed with money borrowed against Musk’s own Tesla stock. (The rest of it? TBD.) “This is an enormous loan,” said Tyler Gellasch, executive director of the Healthy Markets Association. “It’s an enormous amount of collateral and it’s extremely highly concentrated in something that is not a stable value. You just normally don’t see anything like that.”
As the veteran financial journalist James Surowiecki pointed out, that’s more than $1 billion in added interest a year that Musk is going to have to pay out — and that money is going to have to come from somewhere. Last year, Twitter made more than $5 billion in revenue, the most ever, with 89 percent of that coming from ad sales. But it still ended up losing $221 million — partly because of litigation costs, which won’t impact the business forever, but also because the costs of making that revenue went up and Twitter spent more on research and marketing. (Since Tesla spends $0 on advertising, it’s likely that will be among the first line items to go.) Musk’s proposals are light on the details — he has said he wants an edit button for tweets and to turn Twitter’s San Francisco headquarters into a homeless shelter, neither of which would free up all that much, if any, cash. The nascent Twitter Blue feature, which costs users $3 a month, could one day pay off, but for now it’s hardly a blip. That means that for Musk to pay back Wall Street, he’s going to have to rely on Madison Avenue and keep ad buyers from running to the hills. He has already waffled a bit on his supposed absolutism by saying that some moderation is good at either political extreme. And his plan to make moderating algorithms open source doesn’t really present itself as a way for Nazis or the MAGA crowd to stealthily program their biases into Twitter’s bloodstream.
Gellasch pointed out (in tweets, naturally) that if Musk fails in this endeavor, and Twitter doesn’t make enough money to pay back debt, the ones who are now on the hook are, in fact, the Tesla shareholders. With Morgan Stanley borrowing against the car company’s stock price, if Musk can’t make a payment, the bank can seize the shares and dump them into the market. “When a bank seizes collateral, they typically sell it and they sell it immediately,” Gellasch said. Sound implausible? Gellasch pointed out that, just last year, several banks did just that, driving down the price of ViacomCBS by more than 30 percent in a fire sale after the hedge fund Archegos Capital Management went under. Tesla shareholders appear uneasy with shouldering the problems of a totally unrelated company, and on Tuesday the car company’s stock fell by more than 11 percent.
Musk may be the world’s richest man, with somewhere in the ballpark of $270 billion to his name, but nearly all of it is on paper. And at the end of the day, Musk is just another billionaire who has bought himself a media company — one who isn’t all that different from Jeff Bezos or Michael Bloomberg or Rupert Murdoch, in that he’s motivated by money and couldn’t really be otherwise. If he whiffs on this, he could be left with a broken-down social-media dinosaur, dilution of his control over his car company, and — maybe worst of all for a CEO like Musk — a totaled fortune.