Wall Street has lengthy recognized that it’s higher to play with different individuals’s cash. But within the case of
Elon Musk,
different individuals’s cash might restrict simply how a lot enjoying he can do with
Twitter.
TWTR 3.90%
The marketing campaign by the world’s richest individual on paper to take over the social community has picked up severe steam. The Wall Street Journal reported Monday morning that the 2 sides are speaking, and will even finalize a deal on Monday. That comes after Mr. Musk revealed in a submitting late final week that he has secured $46.5 billion in monetary backing for his bid. That apparently was sufficient to get Twitter’s board to take a second take care of initially leaning in opposition to taking the supply. Twitter’s share worth was up practically 4% in early buying and selling on Monday.
Still unclear is what in the end would develop into of Twitter if Mr. Musk prevails. A profitable bid would put a $5 billion-a-year promoting enterprise into the arms of somebody who has publicly questioned Twitter’s promoting enterprise mannequin and whose present firm —
Tesla
— buys no promoting.
The self-described “free speech absolutist” has additionally spoken out in opposition to Twitter’s content-moderation practices, that are designed to maintain poisonous content material off the social community and make it safer for advertisers.
Brian Wieser,
world president of enterprise intelligence at ad-buying large GroupM, says most advertisers who work with Twitter “strongly prefer content standards” on the service.
That might not matter an incredible deal to Mr. Musk, who mentioned of his personal Twitter marketing campaign that it “is not a way to make money” in an onstage interview on the Ted convention, on the identical day of the submitting describing his monetary help. But greater than half of that backing comes within the type of debt, from
Morgan Stanley
and “certain other financial institutions,” based on the submitting. That means Mr. Musk might want to protect Twitter’s money circulate—and ideally develop it—to service the debt. Some of that debt is within the type of margin loans backed by Mr. Musk’s Tesla shares.
Doing that with out promoting could be troublesome. Ads account for practically 90% of Twitter’s income now, whereas information licensing gives many of the relaxation. The firm launched Twitter
Blue
—its first shopper subscription providing—final 12 months, rolling it out to the U.S. market in November. Chief Executive
Parag Agrawal
mentioned on Twitter’s final earnings name in February that the corporate has seen a “strong response” from “our most heavy users” for the service. But he added that Blue is “not critical” to reaching $7.5 billion of income in 2023, a goal set at an analyst assembly in early 2021.
Mr. Musk will doubtless have his personal objectives in thoughts, and a privately held Twitter could be accountable solely to him for reaching them. But until Mr. Musk in some way finds a method to pay for Twitter fully out of his personal pocket, he’ll should be accountable to others as nicely.
Write to Dan Gallagher at [email protected]
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