Elon Musk wants to destroy Twitter, or worse?
The story of the purchase of Twitter is starting to show a worrying profile. And it can't be said that Musk is formally wrong. Of course, his habit of announcing his moves in the media, distorting the market, is questionable. But the request he is making to Twitter is certainly "due diligence".
It means that until now we have all blindly believed in the measures of social networks. They told us, and they tell us: "I have two billion active users, of which bots are less than 5%", which has become the measure of acceptability: bots do not buy, bots are not advertised , so it is imperative that most users are human and have a wallet.
These estimates have so far been accepted simply because no one has ever had the power or the right to conduct due diligence. Or maybe, because no one has ever wanted to do it (because the shareholder doesn't like to question the value of his shares).
Problem is, Musk is putting in 43 billion. And therefore he has the right to see clearly, if not a legal right (he is using a very fast procedure for the purchase), at least a right that comes from the respect of the shareholders, which requires a certain due diligence. 43 billion is not peanuts.
But now we have to ask ourselves what happens if Musk says "I'm not convinced by the evidence provided by twitter". Surely he would still have to pay penalties, but it would be even worse: if an entrepreneur would rather lose a billion than finish the acquisition, it means that what he saw is worth a risk worse than a billion.
So if Musk pulled out completely, everyone on the stock exchange would be wondering what Musk saw that didn't convince him. And since today the US no longer prints free money, but money has an interest, even venture capitalists should consider Twitter a risk rather than an asset. And they would probably get out of it.
So, you have to be very careful: if Musk quits buying Twitter on the grounds that Twitter doesn't really have the users it claims to have, Twitter would die. (regardless of the legal consequences, because he would have lied to his own shareholders about the number of users, etc etc.
Ultimately, then, yes: Musk could destroy Twitter if he retired on the grounds that users are (or can be) miscalculated.
But the problem would be the rest of the market. The NASDAQ has been losing value since the FED stopped printing money and handing it out. Under these conditions, NASDAQ is a powder keg. It's a powder keg if anyone begins to question the number of users / customers of companies. And when I say "someone" I mean the lenders and the investors.
Let's take Facebook: its claim of having two billion active users on a monthly basis is the core of its power. Those who buy advertising services in general look at this fact. If you begin to doubt these numbers, like those of Google or Youtube, you would set fire to the dust.
Apparently, all the ingredients are there for a brutal bubble burst. And when I say brutal, I mean 2008 will seem like a village festival in comparison.
In my opinion, whoever blames cryptocurrencies (because I already smell a scapegoat) is lying. The capitalization of the entire market is not enough to cause the bang that would come: even if it were limited only to the social networks of the greats (Twitter, Facebook, Instagram, Whatsapp, Youtube, Linkedin), we would speak of numbers at least 50 times larger than the capitalization of all cryptocurrencies put together.
Furthermore, if the speculation ended, cryptocurrencies would return to the state from 2012/2013, when I was able to buy a beer in Amsterdam and pay for it in Bitcoin. (at today's price, I paid ~ 15.000 € for a beer, yes) They would return, therefore, to make coins, and not the speculative asset, which they were NOT born to be. (due to my opinions, it would even be a good thing)
But one wonders what a social network can do if someone questions the number of human users.
If we talk about companies that do a lot of things, the damage would be limited. Of course, if there were to be a collapse of Linkedin Microsoft would be sorry, but it probably would not fail because Microsoft does many things, from video games to the cloud, to the operating system, exchanges, etc etc.
Same thing for google. Even if someone doubts Youtube, it would be tough but google would survive: Android, the search engine, the google market, etc etc.
One wonders what would happen to Facebook instead: its value is based on three social networks, and the relationship between bots and humans (subject of advertising) is crucial to decide its value. a possible Facebook bang would have a catastrophic impact on the entire Nasdaq.
Netflix's estimates would be doubted, Amazon Video's numbers would be doubted, and from that moment everything would be at stake.
We are therefore not perceiving the extent of Musk's game: if Musk agreed to pay a billion to get out of the Twitter purchase, using as an excuse that he does not find convincing, the estimate of the users does not convince him, he would bare the King: no social network network has never given anyone independent means to determine the real size of the user base, if not the real profitability.
And there is a risk that this has already happened: in any case, Musk has raised the issue of due diligence on the value of the Twitter user base.
In short words:
- Musk is acting at a time when the Fed is no longer printing free money for the VC.
- The NASDAQ is already suffering from this.
- He questioned the value of everyone's assets, even major giants like Facebook.
- No, if it all blows up, blaming cryptocurrencies won't help you.
- If he skips the game, they'll hear the bang on Messier 31. (it's pretty far away)