Twitter deal sadly upholds primacy of shareholders

NEW YORK, Oct 28 (Reuters Breakingviews) - That was one helluva ride. After more than six months of ping-ponging, second-guessing, whistleblowing, arguing and mud-throwing, Elon Musk on Thursday closed his $44 billion deal to buy Twitter (TWTR.N), opens new tab. The social media firm, its employees, its new owners, its creditors and the rest of the world are probably worse off. But hey, shareholders made out like bandits.

For those who have spent the last half year offline, here’s the recap. On the first trading day after April Fool’s, Musk unveiled a 9% stake in Twitter. He was going to join the board, but then offered to buy the company instead. Twitter accepted, but soon after the billionaire mastermind behind Tesla (TSLA.O), opens new tab changed his mind. He tried to ditch the deal by accusing the company of fudging user numbers.

Then came the big squeeze. Twitter took Musk to court. Faced with the threat of being deposed, he received a stay of execution. A judge set a deadline of Friday to get the deal done or restart the legal process. Just in time, Musk coughed up the cash.

It’s possible to see this as a vindication for American capitalism. A deal, it turns out, is a deal. Musk couldn’t wriggle off the hook. Hat tip to the lawyers – those documents sure did their job! But that’s too simplistic. The courts never actually ruled on the transaction. Those watching the spectacle can only surmise why Musk went ahead. Props to him for creating the ultimate corporate cliffhanger.

In the meantime, the company’s many stakeholders are left holding the bag. Musk has admitted he overpaid. He could still cause trouble for the board depending on what he discovers when he opens Twitter’s books. Banks who agreed to lend the entrepreneur $13 billion before credit markets dried up face hefty losses. The only way for Musk and his co-investors to salvage their investment is to slash costs, including long-suffering employees. Meanwhile, if Musk reinstates divisive tweeters like former U.S. President Donald Trump and fails to crack down on misinformation, the rest of the world will feel the consequences.

That leaves shareholders as the lone winners. If Twitter shares had followed the same trajectory as social media rival Snap (SNAP.N), opens new tab since March 31, losing more than 80%, its investors would be some $38 billion worse off. If capitalism is about maximising value for the almighty shareholder, regardless of the consequences for other stakeholders, the Twitter saga upholds that primacy. It’s a victory of sorts, but not one that leaves feelings of encouragement.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

Elon Musk completed his deal to buy social media firm Twitter for $44 billion on Oct. 27. In a tweet the day prior, Musk told Twitter advertisers that the reason he acquired Twitter was because “it is important to the future of civilization.”