The figure is exorbitant. Even considering that to close the acquisition Musk “only” will spend about 21,000 million dollars out of his own pocket, that is, 10% of his personal fortune (valued at 219,000 million dollars). For more detail, 44,000 million dollars is equivalent to 26.5 times the cost of vaccines against COVID-19 in Mexico (1.66 billion dollars), four times the market value of Cemex (11.4 billion dollars, according to Forbes data) or almost seven times the value of Grupo Inbursa (6.3 billion dollars).
On the other hand, the equation boldness-vision-technology-future, so profitable in other businesses of the South African-American, does not seem to justify the financial risk of buying something that is not a cement company or a space rocket factory or a telecommunications company. Twitter has little or nothing in physical infrastructure compared to other industries.
Musk is buying a microblogging or social networking company with a market value of $56 billion but only 5,500 employees (Tesla, another of his companies, has more than 100,000), only $13.4 billion in assets (cash on hand, inventories, investments , facilities and equipment) which represents only 25% of its market value, and that in 2020 reported a loss of 1.1 billion dollars.
By contrast, América Móvil, for example, with a market value of 48.3 billion dollars (less than Twitter), reported in 2020 assets of 75.6 billion dollars (almost 1.75 times its value) and a net profit of 2.2 billion dollars. This does seem like a profitable business. So, if Twitter is a “small” company with few employees, if it has assets much lower than its market valuation and also reports losses, where is the business for Musk? What is Elon buying with that stratospheric amount? Basically two things: an algorithm and a critical mass of users.
The first is the intellectual property that, with artificial and human intelligence, allows users to stay hooked on the platform, forming a community that interacts and finds in it a space for expression and dialogue, but also for conflict and attack. This community would represent a potential consumer market, although the advertising model (clicks for advertising) has been unsuccessful for the platform, which urgently needs to find other business models.
Thus, today Twitter, as in almost all of its 16-year history, continues to be more of a good future business than a present one. That being the case, is that algorithm and that community worth $44 billion or are there other reasons behind the purchase?
In general, analysts have spoken of two main motivations: the democratic and the technological-economic. The well-intentioned and the interested. Musk himself, who calls himself a “free expression absolutist,” is the representative leader of the former. He has stated that the reason for the purchase is not economic but that he aspires to defend the platform as an “inclusive arena for freedom of expression.”
Let us remember that in recent years, due to being a public company listed on the Stock Exchange and subject to the rules of political correctness (dictated by the large corporations that are its shareholders), Twitter has censored the most extreme speeches (think of the Trump’s blockade), entering the swampy terrain of what is morally good or bad for society, because who decides what is one thing or the other?
According to his statements, Musk would turn Twitter back into a private company and open the algorithm to open source where developers could contribute innovations and communities self-regulate, removing the gag from Wall Street and recovering its place as the public arena of future digital democracy. . A platform where everyone had a space to speak: liberal democratic ideal.
On the other hand, the interested reason tells us that in reality, with Musk’s visionary input, Twitter would explore all the technological possibilities of the social network, adopting the blockchain, cryptocurrencies and all the resources of Web 3.0 to turn it into a decentralized platform open to the multiverse with its infinite potential for monetization. A world of possibilities that, in the hands of this genius of innovation, would pay off in enormous business for years to come.