Twitter Is the Biggest Musk Loser


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DADO RUVIC/REUTERS

Elon Musk’s decision on Friday to cancel his purchase of Twitter is a loss for the social media site, as well as political freedom of expression. The only winners will be progressives who support the site’s censorship of views inconsistent with their views on politics, climate and many other issues.

Critics say Mr Musk was never serious about buying Twitter, but he’s come a long way to show he was. He now faces a $1 billion breakup fee as well as an extensive legal battle with the company. Mr. Musk offered $54.20 a share, but the stock had fallen to $36.81 prior to Friday’s announcement. It dropped to $35.04 in after-hours trading.

Mr. Musk’s acquisition financing was highly leveraged and became more precarious as interest rates rose. He initially offered Tesla stock as collateral, but then attempted to substitute margin loans by bringing in other investors as Tesla stock fell along with the market. He accuses Twitter of undercounting spam accounts and not being transparent.

The site’s user growth is slowing and it has lost $1.3 billion over the past two years even as tech companies’ profits have boomed. In February, Twitter borrowed $1 billion in private markets. But debt is becoming increasingly expensive, and other prospects with the funds to buy Twitter could face regulatory obstacles.

Mr. Musk may be hoping to negotiate a lower purchase price, but walking away would be a loss to political discourse. Conservative tweets that include even purely factual information on issues such as Covid treatments and climate are often labeled as misinformation. Accounts will be suspended without justification and appeals will be answered. No one knows who the magicians are behind the curtains making those decisions, and Mr Musk says he would allow more open debate.

Buying Musk would be a free-market solution to the increasing dominance of technology platforms. Republicans are pledging to target censorship of tech companies if they gain control of Congress in November, and Twitter will be among the first in line. That could also deter investors and potential buyers.

Twitter can help itself by ending its one-sided political censorship, but its bright employees and corporate culture might make that impossible. The company might find that it needed Mr. Musk more than Twitter.

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Appeared in the print edition on July 11, 2022.

https://www.wsj.com/articles/twitter-is-the-biggest-musk-loser-elon-buy-purchase-billion-free-speech-11657476485 Twitter Is the Biggest Musk Loser

Alley Einstein

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