Tesla CEO Elon Musk completed his acquisition of Twitter last week, effectively delisting the company on the NYSE. He sold over $12 billion of Tesla stock to fund the deal. Other financiers included banks, no doubt. But the new private company also has two more significant investors.
Jack Dorsey, the former CEO and founder of Twitter, rolled over his shares on the day Musk took it private. Dorsey's 2.4% stake will be in X Holdings, a new holding company for Twitter. The 18 billion Twitter shares that Dorsey owns are worth slightly over $1 billion.
The Tesla chief also got support from crypto exchange Binance, which now has a $500 million stake in the social media company. Binance is the largest crypto exchange and now seems to be interested in taking an active role in how the microblogging site works.
Binance's first step may be to clean up Twitter's huge bot problem. Bots are automated accounts that can send out tweets, follow users, and show other humanlike behavior on Twitter. Though bots engage with other users, they are fake accounts.
Bots were also the focus of the long court battle over Musk's purchase, since bots skewed Twitter's number of claimed active users. At the time, Twitter made a statement that not more than 5% of monthly active users on Twitter were fake accounts, although Musk disputed that. The issue remains unresolved, even though Musk eventually agreed to buy the company for the original offer price.
Binance plans to set up a blockchain and cryptocurrency team that will likely address the bot issue. Blockchains bring transparency of dealings that are difficult to tamper with. Twitter's bots are examples of bad actors that blockchains' protocols can eliminate.
Musk's Plans For Twitter Remain Unclear
Identifying and removing bots will also be important for ad revenues for the platform because it will allow advertisers to target the right users. But knowing the exact number of bots has not been easy.
According to TechSpot, a July report from analysis firm CounterAction suggested that around 5% of Twitter's accounts that are of interest to advertisers could be fake. But another from Cyabra placed the estimate at 11%. It remains to be seen if Binance's blockchain experiment can find a solution that could bring more advertisers to the platform.
Earlier, Dorsey seemed to favor a decentralization of the social media platform where viewers control what they see. As for Musk's plans for Twitter, they remain unclear.
Follow VRamakrishnan @IBD_VRamakrishnan
