Elon Musk's Cult of Personality brand may not be able to take on the world
Since Elon Musk’s $44bn takeover of Twitter, which struggled to make a profit, his rebranded X hasn’t done much better: It’s lost about half of its value since his take-over. As it stands, the squirrely South African is the last man to have lined up to buy Twitter.
In October of 2022, he lined up some $7.1bn from equity investors, and $13bn in loans from seven banks to buy the platform. The loans have been stuck on the books ever since. Banks like Morgan Stanley, Bank of American and Barclay’s all waded into the deal with the idea to off-load the debt, but it got hung on the books. It doesn’t help that Musk admitted at that time of the purchase that the platform was overvalued. According to Pitchbook LCD the Twitter loans have been hung longer that any similar deal since the economy went boom in 2008 -2009, which is dragging on compensation and their ability to make new loans. The banks were either swayed by hype or, (let’s hope) they knew the whole deal was bent, and did it anyway hoping to secure that heady SpaceX business before World War III starts.
In the name of market stability, the 4717 suggests that the Happy Hour at VC events to be recorded and available for due diligence. If the crowd is ebullient enough for four out of five participants to get lucky, then a deal is over-valued.
Nor doesn’t it help that Musk keeps getting into fights with governments, judges, labor unions and everyone else who questions the judgement of a siloed billionaire who doesn’t quite know how he made all his money – which at this point is more gravitational pull than anything else. But the center of gravity can, and does, shift.
Over at Trump Media – Social Truth’s parent – shares have hit an all-time low, again, after reporting a $16.4mm quarterly loss, with a market cap about half of what it was in March. Donald Trump has a 60% stake in the company, which he’ll be allowed to sell in September. Giving the former president a strange gamble: sell shares in September and tank the price, which will anger his base, or wait until after the election and gamble that he wins. If not, the price will tank anyway. But Trump’s was always a niche platform.
At the risk of stating the obvious, Big Tech works so well because it is so big. All of it operates on enormous economies of scale built the ability to collect huge amounts of global data. The model is getting harder in a world deglobalizing into fractured information systems. Beijing may be chapped that the US is banning TicTok, but it was never allowed in China – a country that effectively built its own internet. Russia tried to, but no, it was Russia. Most countries can’t even try this – and the China-led authoritarian internet is going to turn out like Cold War era Bulgarian blue jeans.
Musk’s slap fight in Brazil, a huge market for an advertising model that is struggling, in endemic to the entire social media universe. More regulation and push-back is coming against the US-led policy of giving tech companies carte blanche. So expect the regulatory battles over the internet to continue, ad hoc to the politics of different countries. The EU has taken the poll-position to set global regulations with its Digital Services Act. If it can set the rules for the road on internet regulation, this gives the EU a great deal of, if not power, at least clout. And let’s face it, that’s the best the EU can hope for right now.
For his part, Elon Musk, facing some $1.5bn a year in interest payments to the above banks is probably hoping to avoid another Brazilian.
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