It has long been suspected that Elon Musk had paid far too much for Twitter. Now the CEO shows in an internal memo that his own assessment is even worse. But he sees hope.
It was a deal that Elon Musk regretted even before it was finally implemented. Very shortly after agreeing on a takeover price with Twitter, Musk tried to weasel his way out of the purchase after all. And even complained about it. Now he has admitted for the first time how much he believes he has miscalculated. And tries to turn that to an advantage anyway.
The remaining Twitter employees should therefore receive new stock awards. Musk explained this in an internal memo available to “The Information” and “Platformer”. Those shares are subject to a valuation of the company that is significantly lower than Musk’s purchase price. The company’s self-assessment is still worth $20 billion. Musk paid $44 billion for Twitter in October.
Expensive acquisition
He probably realized shortly after the first announcement in April 2022 that this price was not justified. The assessment at the time was based on false or incomplete information from Twitter, Musk had tried to argue in court in order to prevent the takeover on the agreed terms. “It’s obvious that I paid too much,” he said in December.
But Musk apparently still sees a lot of potential for the short message service. According to the memo, he sees the value of the company increasing to as much as $250 billion in the future. One is on a “clear but difficult way” to achieve this goal, he claims.
“Reverse Startup”
Musk must be clear that given the past few months, that optimism is hard to believe. After the handover, he repeatedly threatened the company with a possible bankruptcy and prescribed a radical austerity program. A large part of the workforce was laid off and everything that was not needed was sold. Even furniture and indoor plants should bring money into the coffers.
That was absolutely necessary, Musk now explains in the memo. Twitter was therefore only four months away from becoming insolvent. Now that revenue and expenses have been stabilized, remaining employees will receive financial incentives consistent with those of the company, Musk said. One is now a “reverse start-up”.
Lots of optimism
However, Musk does not explain how he intends to lead Twitter to more than ten times its current value. In the last few months, Musk had mentioned the subscription model Twitter Blue as a hope, but so far the income has only been in the low double-digit million range. On the other hand, there is a sharp slump in the advertising market. On the one hand, the industry is already suffering from the difficult economic conditions of the past year, and on the other hand, Twitter has lost even more attractiveness for advertisers under Musk’s leadership. Under Musk, numerous users blocked because of problematic statements were released again on the platform, at the same time the moderation teams were reduced.
This has consequences: since December alone, Twitter’s income is said to have collapsed by 40 percent. Many of Musk’s austerity measures are also likely to prove expensive over time. Under the new boss, the company simply hadn’t paid countless bills, from rent to bills that had already been paid. Numerous creditors are already suing. They are unlikely to increase the value of the company.
Sources: The Information, Platform
