Note: My Taki post is on different topic from today’s post. Sunday Thoughts is up behind the green door. It is also on Substack for paying members there. Going forward, I will post the pay-per-view material on both sites. Some people prefer Substack and other people prefer Subscribestar. There was also a rare Saturday post, which was going to be a Taki post but I changed my mind.
The Elon Musk versus Twitter drama is now heading to the litigation phase, as Musk has decided to pull out of the purchase agreement. The usual idiots have taken to social media to offer their hot takes on the issue. Critics of Musk think he made the great blunder they have been predicting. The far-left thinks this is a victory, when in fact it is the death knell for the platform. It is this fact that led Musk to pull out of the deal and take the issue into the litigation phase.
The basics of the dispute are simple. Twitter claims Musk is the breaching party and they intend to force him to abide by the agreement. They argue that they have given him everything he has asked. That means they will go into a Delaware court and ask a judge to compel compliance. Musk will tell the same court that Twitter is in breach of contract for falling to disclose information about their user base, which they are required to do as part of the sale.
No one really knows if the court can actually force Musk to go through with the purchase agreement and buy Twitter. In contract disputes, courts rarely compel one party to perform against their will. Instead, a monetary judgment is levied against the breaching party. In most cases, a settlement is reached before the court has a chance to decide the issue. In contract cases, litigation is a part of the process of negotiating the final settlement of the dispute.
In most contracts, especially complex ones like this, there is a liquidating damages clause that spells out the cost of breaking the agreement. In this particular case, we know there is a liquidating damages clause. Both parties agreed to a billion dollar fee if they break the agreement. There are conditions and the interpretation of those conditions will be part of the litigation. Musk has not offered to pay the billion and Twitter is not asking to be paid the billion so far.
All of this will make for good drama, but it obscures the fact that Twitter is a dead man walking, regardless of the outcome. That reality was made clear when Twitter agreed to the Musk offer. They were under no obligation to accept his offer. The board could have refused the deal. Management initially tried to add a poison pill in order to make it difficult for Musk to buy shares but relented after consulting with the board and the largest shareholders. They wanted this deal.
Musk said he made his best and final offer. He was a large share holder and had access to their public filings but also access to their management. In other words, he knew the peak value of the company and made a premium offer. Twitter had been saying their target price was $70 per share, but they quickly accepted the offer from Musk at $54 per share. In other words, everyone concerned knew that the $54 price was the best Twitter would ever get from anyone.
For its part, the market never bought the $70 claim or the $54 offer. The stock ticked up on news of the offer, but then traded down to below its prior level as news of the agreement got into the public domain. The day before Musk cancelled the deal, you could buy shared of Twitter at 60% of what Musk agreed to pay. The fact that no one was doing this says that insiders smelled problems. They knew Musk would never follow through on the $54 offer.
One reason for the skepticism is that Twitter does not make money and is unlikely to ever make money. The platform is useless for advertising so its only source of income is selling user data. There are plenty of players in that market. The big fish are Google and Apple, who control the mobile market. Since most Twitter users operate on their mobile device, Twitter data is mostly phone data. In reality, Twitter is just a derivative data stream that is rooted in the mobile data streams.
The bigger issue for Twitter and all social media is the barrier to entry has collapsed and disaggregation is upon us. Gab has proven this. They not only have a stable platform that is better than Twitter, but it was done on a shoestring by one committed guy, in the face of massive resistance by the usual suspects. The future is bespoke platforms of like-minded users. People are looking to be free from the blue-check harpies who have ruined the large social media platforms.
Those who have been on-line since the early days saw this coming. It is part of a natural cycle on-line. The first bulletin boards were big central places. They gave way to small places of like-minded people. Usenet splintered into a million sub-channels once it was possible to do so. The first message board communities were much like the big social media sites, but then over-zealous mods ruined them and the sites splintered into a million small communities.
This is why Twitter remains eager to sell to Musk. They have an inside view of what is happening and they know his offer is the best offer. In fact, they know half his offer is the best offer, which is why they will seek to cut a deal. Twitter is basically worthless as they own little in the way of unique infrastructure and their core product is now a commodity anyone can create. Their main offer is access to emotionally unstable people who want to lecture the rest of us.
Elon Musk may be a monorail salesman, but he is an extremely talented one who has worked the most sophisticated marks in the world. He is also the richest man on earth which means he owns the best legal talent on earth. He did not choose to enter the litigation phase because it is a sure loser. He understands that Twitter will have to disclose things in court that they would prefer to keep private. The fact that he is boasting about this on Twitter is a clue to his thinking.
Many assume this is just a way for Musk to lower the price, but he may be using this phase to bleed the company into bankruptcy. His people looked at the user data and probably saw that Twitter is past its peak. Like centralized internet platforms before it, Twitter is about to die from a thousand cuts. If anyone can put up a similar site for people of the same mind, then what is the point of Twitter? Musk can wait out the answer to that question in a Delaware court.
The fact is, Twitter should never have existed in the first place. It was just a novel implementation of the same old idea that has been with us since the dawn of the internet age. The dream of the virtual agora where the demos can debate the issues of the day and find a consensus has been tried many times. In every case, the demos discovered they did not like it and moved back into their own private warrens and subcultures to be free of the masses.
Familiarity breeds contempt and what the big socials have done is make everyone familiar with everyone else. The solution is what was there all along. The various communities build fences between themselves and the others. That way they do not have to be reminded of their unpleasantness. They can also pretend that those people on the other side are good people who mean well. Good fences not only make good neighbors they make human society possible.
This is why Twitter and the other big socials are doomed. Twitter is the most ridiculous and silly, so it will be the first to go. Facebook sees the writing on the wall, which is why they are betting on their virtual realty scheme. Sites like Instagram are just public bulletin boards that offer little interaction, so maybe they stagger on, but the days of big social media platforms are ending. The looming death of Twitter is just the first big step into the inevitable demise of the concept.
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