• Elon Musk has done a U-turn
• He has once again committed to buying Twitter for $44bn
• It will accelerate his plans to develop an “everything app” called X, he tweeted
• A combination of a WeChat-style app and Musk’s communications strategy could be very disruptive 
• But the takeover deal is going to be hard to finance, says analyst

It’s turning into a week of incredible U-turns. In the wake of the UK government’s dramatic volte-face on its tax cuts for the highest earners, the world’s richest person, Elon Musk, has decided he no longer wants to back out of his offer to acquire Twitter for $44bn and instead will go ahead with the purchase at the originally agreed price of $54.20 per share, stating late Tuesday that the move will help speed up his plans to develop an “everything app” called X.

It’s been a remarkable six months. By early April, Musk had built a 9.2% stake in Twitter, then tabled his $44bn takeover offer for the company in the middle of that month, telling the management and board that the company needed revamping under his ownership because it was being so badly run – see Musk to Twitter: You're so unimpressive that I want to buy the company.

But even then, Musk didn’t find it as easy as he thought to raise the financial backing he needed to close the deal and, following several claims of being misled about how many real users there were on the social media platform, decided in August he no longer wanted to acquire Twitter. The company sued Musk over that retraction and legal proceedings were due to start on 17 October in the Delaware Chancery Court. 

But the prevailing opinion was that Musk seemed destined to lose that case and he seems to have come to the same conclusion, as his legal team sent the Twitter board a letter, shared in this Securities and Exchange Commission (SEC) filing, saying that “Musk Parties intend to proceed” with the acquisition. That news lit a fire under Twitter’s share price, which shot up by 22% on Tuesday to $52.00, which is still a little short of the bid price, so there’s clearly still some doubt that the deal will actually go through. We’ll come to the reason for that remaining doubt in a moment…

In the meantime, Musk is back on board and firing on all cylinders again, taking to Twitter on Tuesday to share the following message: “Buying Twitter is an accelerant to creating X, the everything app”. 

That “everything app” is something Musk has alluded to previously and is something industry watchers have likened to an equivalent of WeChat, Tencent’s messaging, social media and payments app that has 1.1 billion users but attracts regular controversy for its data management strategy.   

And in response to a Tweet that questioned whether it would be easier to develop X from scratch and not use the Twitter platform as a launch pad, Musk responded: “Twitter probably accelerates X by 3 to 5 years, but I could be wrong”.

The name X is a favourite one for Musk, who founded an online bank called X.com more than 20 years ago. It was merged with another company to form PayPal, but Musk acquired the domain X.com back from PayPal in 2017 and is yet to make commercial use of it – it currently just sports a lower case x against a white background.

It seems, then, that Musk has plans to dominate the digital communications and payments world as well as be king of the electric vehicle and low-earth orbit satellite sectors (Tesla and SpaceX/Starlink). And now, of course, he has a strong tie to one of the leading mobile operators in the world, T-Mobile US, through the recently announced agreement to marry up satellite and cellular communications service coverage – a combination of an “everything app” and a disruptive mobile operator that counts one of Europe’s major telcos (Deutsche Telekom) as its parent is something the likes of Meta doesn’t currently have.

But there’s a long way to go before the Twitter acquisition gets over the line, hence why the Twitter stock is still short of the $54.20 offer figure.

That’s likely to be because the letter sent to Twitter by Musk’s lawyers noted that the acquisition is “pending receipt of the proceeds of the debt financing” – essentially, Musk needs to find financial partners willing to bankroll his $44bn offer. 

As mentioned, it was proving to be hard work to get that kind of support five or six months ago, but the needle has since shifted in the global economy, as investment analyst Richard Windsor notes in his latest Radio Free Mobile blog. He points out that the problem for Musk now is that “financing the deal is going to be much more difficult and more expensive than it would have been had he put it together in April… This is because interest rates are materially higher now than they were in April and shares which could be used as collateral or as a source of capital have lost 20% or more of their value… Furthermore, all of those contributing financing will be aware that the shares are ludicrously overvalued which combined with the shortage of liquidity means that they will be demanding a high price for their dollars.”

Windsor has plenty more to say about the deal in general and it’s all worth reading.  He also has the perfect sign off: “This is a textbook lesson in caveat emptor.” 

- Ray Le Maistre, Editorial Director, TelecomTV