What is happening on the social network? Elon Musk's changes since his Twitter purchase announcement cause uncertainty for investors, users and customers.
Photo: TW – Elon Musk
LatinAmerican Post | David Rivadeneira Soto
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Leer en español: Los constantes errores de Elon Musk desde su llegada a Twitter
After a few months of uncertainty, Elon Musk and Twitter finally closed the negotiation and agreed to the purchase of the social network by the billionaire, for $44 billion dollars. It's been a month since this, but the new owner has made yet some changes that have revolutionized the order of the company. Also, these decisions have even had a collateral impact on Tesla and its other businesses. That raises the question about if the price that Musk paid for the little blue bird social network was actually a good move. However, at this point, no economic analyst dares to give a forecast with certainty about the results of this purchase in the medium term.
For the tycoon it could be a great deal or the worst investment of his life, only time will tell. The truth is that there are objective data that do not bode well for Elon Musk. Domingo Soriano, professor of economics and analyst for the media, points out in his podcast "Economía para quedarse sin amigos" and on his page "Libre Mercado", that optimists are more attached to the idea of Musk's spark of genius than to the accounts, which are actually not very flattering. Soriano recalls that Twitter is the smallest network, with 450 million users, compared to Facebook with 2,900, YouTube with 2,500, WhatsApp with 2,000 or Instagram with 1,500. Even so, it is the one with the greatest media influence and power when it comes to resonating public debates and move topics on the news agenda.
On the other hand, according to Fortune, the price Musk paid is excessive if he considers that Twitter's numbers are in the red, since he is currently losing about three million dollars a day. Likewise, according to Fortune, despite the fact that in 2018 and 2019 the company's balance sheets showed net profits of over USD 1 billion each year, the following periods have registered losses, such as that of the last year that resulted in 221 millions. The one of the present also marks a tendency to negative values.
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The Effects of Musk's Moves on His other Companies
On another line are the consequences caused by Musk's indecision to carry out the Twitter business in his other companies and, at the same time, the financial situation and the excessive price he paid to take over the social network. Dan Ives, a technology analyst at Wedbush Securities, told Fortune that the transaction to take over Twitter "will be one of the most overpaid technology acquisitions in the history of M&A deals .” The economic journalist Alan Ohnsman, in a report for Forbes, explains that during the first month of the purchase of the digital platform, some facts such as the massive dismissal of employees, red accounts and the departure of advertisers after feeling repelled by the decisions of the new owner, have caused economic falls in Tesla, another of Musk's flagship companies.
Faced with massive layoffs, they were one of the first decisions of the South African billionaire to reduce the operating costs of his new acquisition and thus cut expenses, in a move to make the blue bird a more efficient company. Among those fired are: former CFO Ned Segal, former legal director Vijaya Gadde and former CEO Parag Agrawal, to whom Musk would have to pay nearly $200 million in severance. The fences of 3,700 people who were laid off, according to Bloomberg, were not notified 60 days in advance as required by law. Many are coming together to file class action lawsuits, while in another move, Musk has decided to rehire dozens of retirees. It appears they were fired in error, he said, but it may be a way of offsetting the negative impact of that decision.
Flight of Free Expression on Twitter or a Door to Hate Speech
In a tweet, Elon Musk expressed that his objective in buying the social network went beyond money and did it for the future of civilization in an attempt to maintain freedom of expression. But some see in this position of absolutism of free expression the risk of fostering lies and hate speech at the same time. According to the newspaper El País, after the change of hands of Twitter became known, messages with xenophobic, racist content and generally provocative of hate speech had increased exponentially. More recently, Musk himself, in an attempt to calm the waters of the debate, expressed that there would be “freedom of expression, but not of dissemination”, which ultimately left more concern about how such regulation in publications would proceed.
Musk's changes to proposals to charge for account verification have caused disarray, with his failure to prepare this feature with enough filters causing impersonators to exploit loopholes to cause chaos. A clear example was that a fake account of the pharmaceutical Eli Lilly, with the status of verified after paying the 8 dollars that had been implemented, published a tweet in which it declared that the insulin would be free. This caused a collapse in the stock market and a loss of its market value of some 14 billion USD, according to El País. It seems that the rush to develop their proposals ahead of time is costing the reputation of both the erratic Elon Musk and the flight of the blue bird dearly. Normally, Elon Musk has been fruitful with his money-related follies, will this be a very expensive one?