Public misgivings

I spent my first regular paycheque in the mid-1990s on a new music system. A cheap-but-not-inexpensive compact unit that – for no reason – had many red lights hidden within its recesses.

In the showroom it looked bold and stylish.

In my bedroom, seen through the window from the pavement below on winter evenings, it made our shared house look like something from Amsterdam’s sex worker district.

Only one person ever actually rang the doorbell to make enquiries.

But from the moment I plugged that stereo in, I had a serious case of buyer’s remorse.

You know – that hollow feeling after you splash the cash on something that seemed so exciting, only to immediately wish you hadn’t.

Red letter day

I suspect even the world’s richest man knows such remorse…and to the tune of the $44 billion he’s agreed (again) to pay to acquire Twitter.

Elon Musk’s offer for the ubiquitous social media platform was accepted back in April.

But then – coincidentally I’m sure – as the stock market crash unfolded, Musk changed his mind. 

Would a mob-fuelled hate-mongering social network really look so good next to his electric cars and spaceships?

Would he ever get his billions back?

We’ve all been there.

Musk protested he was sold a pup. Or millions of pups – fake Twitter accounts run by bots.

Up to 33% of Twitter’s users were false or spam accounts, his legal team alleged in August.

And nobody wants to waste billions on that.

However for reasons that still aren’t clear – but presumably are legally watertight – Musk now says he will buy Twitter. And for the original offer price too.

Given the cost of the drama to his status and bank balance, Musk may even have a rare case of what I call buyer’s remorse remorse – where your original remorse is so bad you ultimately throw even more good money after the bad to rid yourself of the feeling.

To avoid that costly fate I soldiered on with my sordid stereo for five long years, through ridicule, laughter, and damage to my reputation.

Musk could only take six months of the same.

Twitter 2.0

I do consider Elon Musk one of the leading entrepreneurs of our age, for the record.

But I also wonder if in buying Twitter he’s paying an astronomical price for his hobby of saying – or tweeting – whatever comes into his prodigious mind at any given moment.

Because what can Musk do with the platform, really, that even Twitter’s creator, Jack Dorsey, couldn’t manage in two stints at the helm?

Whatever Twitter’s ultimate potential, it’s notable that both Musk and Jack Dorsey believe it can’t be achieved as a publicly-listed company.

Musk said so in his letter announcing the takeover offer.

And Dorsey has said so privately… in text messages to Musk! The exchanges between the two billionaire pals we revealed during the recent legal tussle.

Dorsey apparently thinks Twitter should never have become a company, but rather some sort of platform or foundation. Presumably this entity would make and manage rules about how third-parties would access Twitter – and also leave them to build the apps and reap any profits.

Which is probably not $44 billion worth of music to the ears of Elon Musk, nor his accountant.

Perhaps the kindest thing Musk could do for humanity would be to switch Twitter off. Many would applaud such a move, at least until it was replaced by something even more febrile.

Alas Musk told Twitter’s board in his offer letter that be believed Twitter should be the global platform for free speech. So closing it down seems unlikely, even without $44 billion to recoup.

Twitter will have to be reinvented rather than euthanised.

Never trust a shareholder

Judging by recent hints, Musk is reviving his old dream to create an ‘everything app’ that integrates messaging, shopping, and payments, like those used in China and with Twitter at the core.

And apparently such drastic reinvention couldn’t be done while Twitter remained a listed stock.

But is that really true?

I understand the theory. Public market shareholders are supposedly greedy for steady and predictable cashflows and nervous about huge bets that may not pay off.

A year ago a hedge fund manager even labelled London’s Stock Exchange as a ‘Jurassic Park’ full of dinosaur companies that were hamstrung by income-seekers demanding dividends.

I was unpersuaded by that line, too.

UK investors are probably excessively attached to dividends.

But many of the major dividend-payers in London deal in commodity markets, where the clue is in the name. There’s only so much bold innovation you can get out of a lump of iron ore.

Others are Steady Eddie consumer giants that do a fine job generating cash, but where you’d be worried if they were deploying most of their profits to – I don’t know – regularly reinvent toothpaste.

As for the US stock market, its investors are famously tolerant of money-burning companies on a mission, just so long as they believe management has a plan.

Think about the long leash Amazon was given for decades to grow, with little in the way of profits.

Or how software incumbents like Adobe have transitioned from the lucrative business of selling discs in boxes to instead earning small recurring subscriptions for services based in the cloud.

I believe Twitter’s shareholders would also have been all ears if offered a compelling new vision.

I mean, even today Twitter shares trade below a price they hit shortly after it listed back in 2013.

There wasn’t much of an apple cart to upset here.

Not too big to fail

The truth is Twitter’s public shareholders couldn’t support a radical transformation not because they wouldn’t stomach it, but because they were never presented with one.

The year Twitter listed, rival Facebook’s CEO Mark Zuckerberg famously said: “Twitter is such as mess – it’s as if they drove a clown car into a gold mine and fell in.”

And not much has changed since then.

That’s why I don’t like to see leaders of Musk and Dorsey calibre blaming public market investors for hamstringing Twitter’s future.

The 2010s saw big tech winners like Twitter remain private for years as they grew into multi-billion valuations. We ordinary investors weren’t given a look in.

Only when they processed onto the public market like Imperial Star Destroyers trying to taxi at Gatwick could we finally buy into their now gigantic valuations.

It was a frustrating time – made even worse because when we finally did get a chance to back multiple innovative and disruptive companies, it was at the tail end of a long bull run.

By that time almost anything could be foisted onto the US Nasdaq exchange if promoters used the right buzzwords, culminating in the dubious SPAC boom – and the current stock market crash.

Most investors would have gladly swapped the whole miserable experience to instead invest in the likes of Uber, Spotify, and even Twitter when they were far smaller – and riskier– than today.

But they never had that opportunity.

So long and thanks for all the Tweets

We’ll now see if Musk will suffer winner’s curse in taking Twitter off the public markets.

Winner’s curse is the nastier big brother of buyer’s remorse. It’s when you win a bid – for an antique at auction, say, or maybe a social media giant you spent months trying not to – only to pay too much for it.

Musk certainly faces huge challenges if he’s to simultaneously champion Twitter as a free speech platform while remaking it as a Western version of Tencent’s WeChat – and make a profit on his $44 billion investment.

But at least he has the chance.

Twitter’s long-suffering public market shareholders can only take Musk’s money and continue to watch from the sidelines. So let’s not blame them for Twitter’s – or any other company’s – problems.