Elon Musk reached a deal to buy Twitter for $44 billion, Musk and the company announced Monday afternoon. But negotiating the deal may prove easier for Musk than owning the company.
Musk faces immense challenges in reviving the 15-year-old service, which has suffered from stagnant user growth and uneven ad revenue performance for years. Ad industry executives on Monday warned that advertisers could flee the service if Musk relaxes controls over content and allows misinformation and other toxic material to flourish. He is also likely to face resistance from some of Twitter’s 7,500 employees, many of whom dislike Musk’s brand of free-speech politics.
Moreover, Musk may be about to take control of Twitter as a recession engulfs the U.S. economy, which could hurt Twitter’s ad business regardless of who is in charge. That could amplify the financial risks he is taking on with the acquisition, given that he plans to borrow about $25 billion to complete the purchase, in addition to injecting $21 billion of his own money. The interest costs on the debt would consume most of the cash the company’s business has historically generated, making it vulnerable to any downturn in its business.