An expert explains why the acquisition can succeed
- Commentators have criticized Elon Musk’s bid to buy Twitter, but there is a revolutionary case for the takeover.
- A Wall Street analyst said Musk has built successful large-scale companies in the past, and he can take his vision to the social platform.
- Morningstar’s chief equity analyst explained how the Musk acquisition could give Twitter a boost.
Elon Musk has been criticized for his $43 billion bid to buy Twitter, but his visual business mind can simplify the implementation of new products and ideas for the social platform, according to a Wall Street analyst.
That could boost Twitter’s stock, which is up nearly 19% since its 2013 IPO — well below the S&P 500’s 260% growth in the same period. Meanwhile, Musk’s empire – Tesla, SpaceX, The Boring Company and Neuralink – has a track record of hitting huge ratings and building cutting-edge technologies.
For example, Tesla has gained more than 21,000% over the past decade and has surpassed $1 trillion in market capitalization despite being the most underperforming stock of all time.
“Twitter has extraordinary potential. I’m going to open it up,” Musk said in a letter to Twitter CEO Brett Taylor.
In an interview with Insider, Morningstar chief equity analyst Ali El Maghribi explained four ways Musk can improve Twitter’s fortunes.
Maghribi explained that Musk has about 83 million followers on Twitter, and given his great success in leading other companies, it is likely that more users will flock to the platform in the event of an acquisition.
His popularity alone can have a huge impact in attracting and retaining people, even if he doesn’t make any changes. But as Musk has spoken enthusiastically about easing content restrictions, existing users may become more engaged.
“The engagement has to increase and then the increased engagement will bring in more users, and they will spend more time on the platform,” Al-Maghraby told Insider.
Leadership and Efficiency
Musk turned Tesla and SpaceX from start-ups into pioneers in the automotive and aerospace industries, respectively. SpaceX is now the second most valuable private company at $100 billion. The Boring Company for its tunnel-making project has just completed a $675 million funding round, which it estimates $5.675 billion.
Al-Maghraby said he could bring the same wise leadership to Twitter.
“Look at what he’s done with other companies, he can really bring some innovative ideas to the platform,” said El Maghraby. “New features and ways to change them — and it can do it all efficiently, which Twitter has missed in the past.”
He added that Musk has a knack for surrounding himself with bright minds from various industries, and offering new perspectives. In addition, Musk will be keen to test and implement new ideas quickly and effectively, as he has done at his other companies, Maghraby said.
data and advertising
If Musk loosens content restrictions on Twitter, it is likely that some advertisers will not continue to do so. But even if some leave, Musk will be able to attract new advertisers by increasing the impact of the ads.
For example, Musk may demand more efficient use of first-party data collected by Twitter, Maghribi noted. “This will increase the effectiveness of advertising, which can then attract more advertisers, which will then lead to increased sales growth.”
Twitter rolls out its own Twitter Blue last June, giving subscribers access to the undo button, customizable icons, and more. Musk talked about cutting the subscription price from $3 to $2, and El Maghraby said that could attract new users while boosting access to new features.
Musk also said that Twitter Blue users will get a blue check mark, another incentive that could drive signups.
Magrabi added that the penchant for the subscription model can raise the level of discourse, because users will have the incentive to engage in higher-level conversations if they pay.
“Getting users to sign up for Twitter could be a positive for the company, and could bring in higher levels of engagement for people willing to pay to use the platform,” he said.