Elon Musk’s Twitter play: What’s at stake for the company, its India operations

Elon Musk told the US SEC in a filing on April 14 that he wanted to buy out Twitter at $54.20 a share and a valuation of $43 billion. (Illustration by Suneesh K.)

“Twitter is what’s happening and what people are talking about right now.”

Those are the words that greet users when they click on Twitter’s About page. They could not have been more right.

From Elon Musk’s offer to buy the US social media platform Twitter to the firm's adoption of the "poison pill" a day later to thwart a hostile takeover, the company has been in a whirlwind of activity recently.

The company and its largest individual shareholder, Musk, are clearly at war, a move that has come as a surprise and yet shouldn’t have, considering his mercurial persona.

Whether Twitter’s board decides to open the door for further negotiations after adopting the so-called poison pill or stop the acquisition completely, the decisions could have a significant impact on the company and its India operations.

Moneycontrol spoke to experts to understand the impact of a potential acquisition on the platform and what it would mean for India.

What happened?

On April 14, Musk, the world’s richest person with a net worth estimated at $251 billion, offered to buy Twitter in a $43-billion deal and take it private. The offer came soon after Musk disclosed a 9.1 percent stake in the social media platform, making him the largest individual shareholder and one of the largest investors in the company.

A day after Twitter said it would review Musk’s proposal, the company’s board adopted the poison pill. In a filing about the unanimous vote to adopt the poison bill, Twitter said this will not prevent it from accepting an acquisition offer if it was in the best interest of the company and its shareholders.

As the battle rages, there are a few things about this whole affair that raises concerns.

Twitter in India, Musk’s run-ins

India is one of the largest markets for social media companies and Twitter is no exception.

There were 23.6 million users of Twitter in India as of January 2022, according to market intelligence firm Statista. At Twitter Analyst Day on February 25, 2021, Kayvon Beykpour, who was head of product at the time and is now general manager for consumer products, said it saw promising growth in countries like India with 74 percent year-on-year monetisable daily active user growth in Q4 of 2020.

According to Neil Shah, vice president of research at Counterpoint Research, for any internet giant or company, India is one of the biggest markets after the US because of the sheer population and scale and it is still an underpenetrated market with respect to smartphones in the hands of consumers.

“So, it’s a huge potential market in terms of scale and just sheer advertising perspective,” Shah said.

But with Musk in the picture and India-born Parag Agrawal at the helm of Twitter as the CEO, it’s not clear how it could pan out.

“Someone like Parag being a CEO and an Indian understands fairly well how important and strategic market India is but Elon might have a different vision,” he added.

Musk has already said he doesn’t “have confidence in the management” of Twitter, indicating a likely change at the top if the deal goes through. Agrawal was appointed Twitter’s CEO in November 2021.

As Nick Bilton, author of Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal, said in a Vanity Fair article, “Whenever the company has gotten a new CEO and tried to focus on anything, a distraction rears its head and knocks the company off course.”

Then, there’s the history of standoffs between Twitter and the Indian government, the most recent being compliance with the new IT rules. Musk’s track record with India hardly helps.

Tesla, the $54-billion electric vehicle company headed by Musk, has long been involved in a standoff with the government over import duties. The company wants the higher import duties slashed, a move opposed by local companies. Musk said in January 2022 that the company was still working through “a lot of challenges” to launch its cars in India.

Starlink, a part of Musk’s SpaceX, was barred in November 2021 from accepting pre-orders for its satellite broadband services in India without a licence. The department of telecommunications also ordered the company to refund all pre-orders it had accepted. Starlink’s India head Sanjay Bhargava quit in January this year.

Absolute free speech

Another challenge in the India-Twitter equation is Musk’s free-speech claims.

Social media platforms from Facebook to Twitter have been struggling with balancing free speech and moderation. Despite Musk’s claim of allowing free speech on the platform, experts have raised concerns over what it would mean.

“Many had termed Twitter as more supportive of the left with its attempts to curb fake news and hate speech on the platform,” said a social media founder, who did not want to be identified. “We need to see which side of the coin Musk is on. Either way, it will be biased.”

“At least at this point, Musk does not really need to pander to anybody or any government at all, unlike a Twitter board since it is a public company,” said Karthik Srinivasan, a communications strategy consultant. “This is in consideration of geopolitical ramifications.”

This is important considering that Twitter is home to several government handles that use the platform as a distribution medium. Twitter, which is a public firm, will need to take a more guarded stance in public even as it works in the background to appease governments.

But Musk, experts pointed out, has no such compulsions and can do whatever he wants to.

“If he chooses to, he can just shut off India operations of Twitter in one day, literally. He can do it and he’s the kind of guy who will be willing to do things like that,” said Srinivasan.

That puts a very different spin on the ramifications it can have from the perspective of geopolitics. For instance, Nigeria banned Twitter from June 5, 2021, to January 13, 2022 after Twitter deleted certain tweets by the Nigerian president and temporarily suspended his account.

During a TED interview, Musk said Twitter should match the laws of the country and there’s an obligation to do that. He also said Twitter should open-source its algorithm and if any changes are made to people’s tweets, or if they’re emphasised or de-emphasised, that action should be made apparent.

While Musk’s claims are yet to be tested, concern also stems from the cult status that Musk enjoys on Twitter.

Significant clout

With 82.3 million followers, Musk has a significant influence on the platform, which he hardly fails to use. Lest one forgets, Dogecoin and Shiba Inu, two cryptocurrencies, gained popularity thanks to a single tweet from Musk. Last year’s crypto-crash was triggered after his tweet on suspending Bitcoin as a payment option at Tesla.

And therein lies the problem.

Bloomberg Opinion columnist Matt Levine pointed this out in a recent article. Of the six challenges facing the Twitter board that he pointed out, three stick out and they all relate to Musk’s influence on the platform.

• He will tweet so many mean things about you, and those mean tweets will get lots of engagement.
• Your defence will be like “no, we know what we are doing, we are excellent at maximising long-term value for our shareholders and we have a viable plan to make Twitter vastly more valuable in the future,” which is somewhat empirically doubtful.
• If you prevail and Musk’s offer goes away, he’ll probably quit Twitter in a huff, you’ll lose your noisiest user, the stock will drop and you’ll get sued some more.

“In any organisation, boards need to be powerful and authority needs to be distributed. With Elon, this will not matter,” said the social media founder cited earlier.

A social media executive, who describes Musk as the "Wild West Cowboy", said an influential platform like Twitter should be handled with thought and care and Musk is hardly known for that.

“He tries things and if they don’t work, he just pays the price for it and moves on because they can afford the entire price in the world quite literally,” the executive added.

The way Musk uses Twitter creates an additional layer of challenge.

In 2018, Musk called a British caver who was involved in the rescue of Thai schools a "paedo guy". Later, he backtracked and while defending himself against a defamation suit in court claimed that "paedo guy" does not mean "paedophile".

Still, some analysts said Musk could help turn the company around.

Business positives

Prabhu Ram, head–industry intelligence group, Cybermedia Research, said with Musk at the helm, it would bode well for the firm’s financial health.

Musk has been able to turn around businesses such as SpaceX, Tesla and PayPal. This could well be the case for Twitter, too.

Musk hasn’t disclosed how he would rev up Twitter’s business, though he said during the TED interview that his top priority would be to “eliminate the spam and scam bots and the bot armies” on the platform.

The company faces the daunting task of achieving its target of reaching 315 million monetisable daily active users (mDAUs) and revenue of $7.5 billion by the end of 2023. It had reported 217 million mDAUs as of Q4 2021 and  annual revenue of $5.08 billion at the end of 2021.

Industry experts said Twitter Blue, the premium subscription service, could likely see accelerated deployment, something Musk has long talked about.

“When it comes to its revenue, Twitter Blue and other initiatives will get bolstered,” Ram concurred.

But would all these be enough to hand over control of the platform to Musk? Guess time will tell.