Elon Musk’s takeover of Twitter for $44B has been called many things. Risky. A victory for free speech. A narcissistic ego trip. A complete disaster. The mistake of a very divorced man. True or false, these criticisms are superficial. What is the method behind Elon’s madness?
Getting the Gang Back Together
Based on moves like ending the ban on COVID misinformation, attacking “””wokeness,””” and unbanning far-right instigators it looks like Elon’s business plan for Twitter depends on winning over the right-wing refugees who fled to Gab, Parler, and Truth Social.
@realDonaldTrump was one of the most sensationally offensive and popular accounts on Twitter. Many users left the site after Trump was banned — not only his conservative supporters but also connoisseurs of fine shitposts. Unfortunately for Elon the Trump train has left the station. The former president and his followers will stay on his proprietary ripoff of Mastodon, Truth Social.
Elon is reusing old Trump bits because he couldn’t get Trump to leave TS. Elon is left to create traffic-boosting outrage on his own. Sadly Elon is not half the poster Trump was and his efforts are pitiful.
Elon has not only drawn in conservatives but also driven out liberals. Two million new users fled Twitter for Mastodon since Elon’s takeover of the bird site. He started to ban journalists and other accounts that report critically on him and his businesses. On 18 December he banned links to competing sites including Mastodon, an attempt to stem the outflow of users.
Elon has posted often about the business metrics of Twitter since he became its CEO and sole director. He has boasted of increased traffic, a new revenue stream from selling verifications, and a 75% layoff rate. Elon claimed on 20 December that these moves had saved Twitter from a $3 billion shortfall. He cited these numbers to support his argument that Twitter could become profitable (it is a well known money pit that has never made a profit).
It looks like Elon is laying waste to the company: gutting the moderation teams, alienating advertisers and users, and discrediting the verification system. Is his effort to make Twitter profitable just a desperate attempt to flip the company and recoup some of his losses? If so then Elon must have really lost his mind. He wants to sell it at cost, for $44 billion:
If this is all true and Elon is trying to salvage an impulsive and egotistical purchase, then who were the foolish investors willing to support his hostile takeover?
The House of Saud
Elon’s plan to buy Twitter and take it private (remove it from the stock exchange) required him to own a majority of all shares of the company. To achieve this he had put together $36.9 billion of his own cash, assets, stocks, and loans. The remaining $7.1B was provided by a group of 20 investors in exchange for shares of the newly private Twitter.
Chief among Elon’s backers is Prince Al Waleed bin Talal Al Saud. Part of the Saudi royal family, Alwaleed is also the founder, CEO, and 95% majority shareholder of Kingdom Holding Company (KHC). KHC is a massive investment firm partially owned by Saudi Arabia’s sovereign wealth fund, and so invests in the interests of the state.
Alwaleed’s stake in Twitter was valued at $1.9B in Elon’s takeover bid. Even at this inflated price (38% above market) the Prince had initially refused the offer as too low:
I don’t believe that the proposed offer by @elonmusk ($54.20) comes close to the intrinsic value of @Twitter given its growth prospects.Prince Alwaleed, 14 April 2022. From Twitter.
Being one of the largest & long-term shareholders of Twitter, @Kingdom_KHC & I reject this offer.
Elon was able to convince Alwaleed that he could realize Twitter’s potential. Rather than take the cash Alwaleed pledged to reinvest his $1.9B in the new Twitter. He now owns about 4% of the company and is its second largest shareholder.
Prince Alwaleed and KHC are in no hurry to pull profits from Twitter. They have been invested in the company since before it went public and they will remain after it goes private again. Throughout this time Twitter has been a net loss for investors, burning through hundreds of millions of dollars more than it has ever brought in as revenue. If money is not the goal of Prince Alwaleed’s Twitter strategy then what is his goal?
A Caged Bird Still Sings
Kingdom Holdings first became a Twitter shareholder in 2011. On 19 December 2011 Bloomberg reported that KHC had invested $300 million in Twitter in exchange for a “strategic stake” of more than 3% of the company.
2011 was the year of the Arab Spring, the revolutionary wave which swept away the governments of Tunisia, Egypt, Libya, and Yemen. Protests broke out throughout the states of the Arab League, including Saudi Arabia.
On 29 January 2011 protesters in Jeddah criticized the government in the wake of a deadly flood. Dozens were arrested only 15 minutes after the demonstration began. A Day of Rage planned for 11 March “fizzled in all but restive Eastern province, where the country’s minority Shiite Muslims have been holding demonstrations for weeks.” Saudi protests remained small and so did the concessions. This was the heart of the counter-revolution, the Arab Winter.
Despite their relatively small scale the Saudi protests shared something in common with those that forced the Egyptian and Tunisian governments to resign. They were organized on social media:
Mass messages were sent over BlackBerry smart-phones calling for popular action in response to the flood, an unusual move in the Gulf state.Montreal Gazette, “Flood sparks rare action”. 29 January 2011.
The Day of Rage had been organized on Facebook. Though the actual turnout would be only a few hundred people the Facebook group had attracted tens of thousands of users.
Throughout the Arab Spring social media was used to spread calls to action, facilitate political discussion, and organize widespread protests. A survey by the Dubai School of Government found that almost 90% of Egyptians and Tunisians had organized or promoted a protest on Facebook. The Egyptian government had used an internet “killswitch” to prevent people from organizing online. This resulted in more users switching to Twitter, which sent messages via SMS instead of the main Internet Service Providers. Though Twitter use was limited to .015% of the population almost all of the 10,000 daily tweets were about the revolution.
So while King Abdullah was supporting counter-revolutionary forces across the Arab World his cousin Alwaleed was buying a “strategic stake” in one of the protesters’ critical tools. What does Saudi Twitter look like today?
Saudi Arabia has also mastered the art of using the platform to mould public opinion tactfully . . . weaponising it by embedding it with their narratives is more advantageous instead of banning it outrightly like China.From Swarajyamag, “Maverick’s Machinations: Musk no longer Twitter’s largest shareholder”. 15 April 2022.
It is worth noting that many of the bot accounts that Elon complained about are from Saudi bot farms. Saudi bots are cheaply available for global clients. They even advertise in local American newspapers.
Saudi Arabia is one of the most Twitterbrained countries on earth. With 14 million users they only lag behind Britain by 4 million — despite the fact that the UK has nearly double the population of the KSA. Twitter didn’t even have an Arabic interface until 2018. This means an estimated 40% of Saudis are Twitter users.
Twitter has provided the Saudi royal family with the means to manage public discourse in Arabia. Messages pass through Twitter’s central servers, making it easy to filter and broadly censor information. Bot farms can control what is trending and who is an influencer. Well-placed friends of the King can use Twitter to direct social narratives.
Projecting Saudi Soft Power
Given this managed media environment, what did Saudi citizens think of Musk’s takeover bid? Analyst Jamal AlTamimi described the public response:
Saudis as a whole are very happy with the deal because they [believe] Twitter’s administration is against them and they think Musk will be more just.From Al-Monitor, “Saudi Arabia and Turkey react to Elon Musk’s Twitter takeover”. 26 April 2022.
Perhaps this is so, and the re-privatized company will remove restrictions placed on Saudi Twitter and the narratives it promotes.
In any case Elon must answer to his other shareholders, especially because of how much debt he has taken on to gain control of the company. This is, according to Senator Chris Murphy, a national security threat demanding the attention of the Committee on Foreign Investment in the U.S. (CFIUS). As the sole director of the company Elon’s personal business can instantly become Twitter’s business.
Just below the surface of this deal is a story of Saudi intrigue and international conflict. This is only one layer of the politics of Elon’s Twitter takeover. If we want to see more deeply into this matter then we should look to the interests of the other major shareholders…
[ Featured image from The New Arab, “Saudis in talks to take Tesla private,” 13 August 2018. ]