Elon Musk Would Be a Fool to Buy Twitter

Twitter, never a good business, has fallen apart further since Elon Musk made a $44 billion offer to buy it. The company’s market cap has fallen to $30 billion, and both management and workers are panicked and in disarray.

Most importantly, a look at the results of social media company Snap showed that sector ad revenue has begun to fall apart and will continue to do so in the near term. Twitter’s revenue and financial results will deteriorate throughout the year. Musk’s gamble will become progressively more expensive.

The plan to buy Twitter has become more complex, which adds another level of risk. According to The Wall Street Journal, which reviewed SEC documents, “Mr. Musk’s funding plan now includes $33.5 billion in equity, up from $27.25 billion, according to a Wednesday regulatory filing.”

Musk also must try to greatly improve the morale of a sullen workforce that could become mutinous. He will have to run a company with many employees who do not want him as an owner. They also will be anxious that he will cut the workforce to save money. The most talented employees will leave. The demand for tech workers may be at one of the highest levels in history. Twitter will be a husk of what it was just months ago.

Musk also risks alienating users. His plans to change the service carry extreme risk. Tens of millions of people who use the service have expectations that changes to their experience will be few and incremental, which is true of almost all products and services. Musk appears to be ready to alter Twitter substantially and quickly.

The dollar price, the employee morale issues, falling advertising rates and potential alienization of users add up to a massive set of risks, and that means Musk has agreed to a deal that will cost him more than he bargained for.

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