Why Elon Musk Will be Twitter’s Next CEO

Elon Musk, Dogecoin enthusiast and Tesla CEO

The market plunged again this morning as both the S&P and Dow sold off considerably. The Nasdaq Composite fell, too, albeit not quite as much as the other major indexes. Tech shares were buoyed by an impending buyout of Twitter (NASDAQ: TWTTR) by Elon Musk, as reported by Reuters earlier today.

What really got the day off to a bad start, however, was a rout from Asian shares. US stocks followed suit after spiking Covid cases in China prompted a 5% daily loss from the Shanghai Composite. Absolutely draconian lockdown measures – like the killing of pets owned by Covid infected individuals – have been unable to slow the spread of the virus.

Now, investors are weighing last week’s rate hike fears as well as newly stoked Covid concerns. This has quickly generated a major bearish impulse.

“Stocks are kicking off the week deeply in the red as all the anxiety and negativity from Thurs/Fri carried over the weekend,” wrote Vital Knowledge founder Adam Crisafulli.

“The dramatic shift in [central bank] tightening expectations last week remains a huge overhang, but China is quickly rising the top of the list of market fears as Covid shutdown concerns spread to Beijing.”

And it could get a whole lot worse if S&P earnings fail to impress later this week. From April 26th to the 28th, four of the market’s five biggest stocks (AAPL, MSFT, GOOG, FB) are set to report earnings.

So far, this earnings season has been a mixed bag. Value stocks certainly seemed to do better than growth shares last quarter.

But most companies, regardless of sector, are warning shareholders that things could get hairy in Q2 (and beyond) with the rest of the year looking so uncertain. Netflix (NASDAQ: NFLX), for example, said last week that it expects to lose 2 million subscribers over the next quarter. If the market’s other brand-name tech firms issue similar guidance, the broader indexes would likely crater.

MSFT and GOOG report earnings after the market closes tomorrow. Wednesday could be a veritable “blood bath” if shareholders don’t like what they hear.

The lone bright spot for tech bulls these days is Musk’s ongoing attempt to buy Twitter. CNBC reported at 7:25 am EST that Musk and his backers were in the “final stretch” of talks. This prompted a surge in Twitter shares that saw the stock open almost 4% higher on the day. 25 minutes later, Reuters claimed that the impending deal would preclude a “go-shop” provision, which would allow Twitter to accept rival offers.

Debates over this provision in the mainstream financial media unmasked those in support of Musk’s latest conquest and those against it.

In a pre-market interview with CNBC, Axios Business Editor Dan Primack glibly commented that it was “interesting to [him] that Musk was the one fighting the ‘go-shop.’ If everyone was so confident [in the bid],” he said, “why does Musk not just allow the ‘go-shop?’”

The reality is that no one else would be willing to pay $54.20 per share for TWTR, which is Musk’s current (and final) offer. Musk wants to exclude the “go-shop” because he knows just how good his offer is, and he’d prefer to not have spoiler bids come in to ruin the deal.

Primack also discussed the unlikelihood that Musk would become CEO of Twitter if his offer were accepted, as it would make him the CEO of three major companies simultaneously.

And though most analysts expect him to appoint a CEO at Twitter, the other alternative (and more likely outcome, in my opinion) involves Musk taking the reins at Twitter while stepping down at SpaceX, where his vision is shared by the rest of the company’s c-suite.

There are certainly plenty of Musk “copycats” at SpaceX ready to fill his shoes at a moment’s notice. There is no one at Twitter currently who would be able to achieve Musk’s goal with the social media platform. And there are probably no external hires that Musk trusts with that job, either.

It should also be considered that Musk’s acquisition of Twitter is more than a mere investment. Analysts continue to compare the purchase to other hostile takeovers of the past. Instead, I’d say the current situation has more in common with a wealthy individual trying to buy a sports team. When former Microsoft CEO Steve Ballmer bought the LA Clippers for $2 billion in 2014, he wasn’t primarily doing it to make money, even though he claimed that there was “real upside opportunity” at the time.

He bought the team first and foremost because he loved basketball. Musk, unsurprisingly, loves to tweet. He wants to do it on his terms, free from Twitter’s current censorship policies. He wants others to enjoy that freedom, too.

And at a price of $54.20 per share, it looks like his wishes will come true, possibly as soon as later this afternoon.


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