The board of Twitter has agreed to a US$44 billion takeover offer from billionaire Elon Musk.
Musk, who made the shock bid less than two weeks ago, has claimed he is the right person to “unlock” the social media firm’s “extraordinary potential”.
He also called for a series of changes from relaxing its content restrictions to eradicating fake accounts.
The firm initially rebuffed Musk’s bid, but it will now ask shareholders to vote to approve the deal.
Musk is the world’s richest man, according to Forbes magazine, with an estimated net worth of US$273.6b mostly due to his shareholding in electric vehicle maker Tesla which he runs. He also leads the aerospace firm SpaceX.
“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” he said in a statement announcing the deal.
“I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.
“Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”
The move comes as Twitter faces growing pressure from politicians and regulators over the content that appears on its platform. It has drawn critics from left and right over its efforts to mediate misinformation on the platform.
In one of its most high-profile moves, last year, it banned former US President Donald Trump, perhaps its most powerful user, citing the risk of “incitement of violence”.
At the time Musk observed: “A lot of people are going to be super unhappy with West Coast high tech as the de factor arbiter of free speech.”
News of Musk’s takeover has been cheered by the right in the US, although Trump on Monday told Fox News he had no plans to rejoin the platform.
The White House declined to comment on the takeover but spokesperson Jen Psaki told reporters: “No matter who owns or runs Twitter, the president has long been concerned about the power of large social media platforms.”
What is Elon Musk’s record on Twitter?
Musk, who has more than 80 million followers on Twitter, has a controversial history on the platform himself.
In 2018, US financial regulators accused him of misleading Tesla investors with his tweets, claims that were resolved in a US$40b settlement and that Musk continues to deny.
And in 2019 he was hit with a defamation suit – which he successfully defeated – after calling a diver involved in rescuing schoolboys in Thailand “pedo guy” on the platform.
On Monday, Musk, who has been known to clash with journalists and block critics, suggested that he saw Twitter as a forum for debate.
“I hope that even my worst critics remain on Twitter, because that is what free speech means,” he wrote just hours before the deal was announced.
Can Musk turn Twitter around?
As part of the takeover, which is expected to close later this year, Twitter’s shares will be delisted and it will be taken private.
Musk has suggested this will give him freedom to make the changes he wants to the business.
Among other ideas, he has suggested allowing longer posts and introducing the ability to edit them after they have been published.
Twitter shares on Monday closed more than 5 percent higher after the deal was announced.
But the price remained lower than Musk’s US$54.20 per share offer, a sign that Wall Street believes he is overpaying for the firm.
Musk has said he did not “care about the economics” of the purchase. However, he will take on a company with a chequered record of financial performance.
Despite its influence, Twitter has rarely turned a profit and user growth, particularly in the US, has slowed.
The company, founded in 2004, ended 2021 with $5b in revenue and 217 million daily users globally – a fraction of the figures claimed by other platforms such as Facebook.
Twitter board chair Bret Taylor said it had fully assessed Musk’s offer and it was “the best path forward for Twitter’s stockholders”.
It is not clear who will lead the company moving forward. Twitter is currently led by Parag Agrawal, who took over from co-founder and former boss Jack Dorsey last November.
But in his offer document, Musk told Twitter’s board: “I don’t have confidence in management.”
Agrawal on Monday said: “Twitter has a purpose and relevance that impacts the entire world. Deeply proud of our teams and inspired by the work that has never been more important.”
How did the deal come together?
Musk’s targeting of Twitter has moved at remarkable speed. It emerged at the beginning of April that he had become the largest shareholder in the firm with a 9.2 percent stake.
He was then invited to join Twitter’s board but turned down the offer before launching a surprise bid for the company on 14 April, saying he wanted to “unlock” its potential as a bastion of freedom of speech.
Twitter tried to fend off his bid, threatening to dilute the shareholdings of anyone who bought more than a 15 percent in the firm. However, its stance shifted after Musk revealed more financial details about his proposed bid.
He has secured US$25.5b of financing for the deal and will take a US$21b stake in the business.
The board unanimously approved the bid, which will now be presented to shareholders for a vote.
House price growth slowing, but not yet buyers’ market – real estate firm
It is not a buyers’ market yet, according to one of the big real estate firms, which sees current house market conditions as calm and balanced for buyers and sellers.
Century 21 New Zealand owner Tim Kearins said house prices were forecast to weaken, but any savings for buyers were likely be offset by rising interest rates in the long run.
Recent sales data from the Real Estate Institute indicates median house prices fell 8.8 percent in April over the year earlier to $875,000, from $804,362 in April 2021.
“It’s easy to compare now to some unbelievable prices achieved during 2020 and 2021,” Kearins said, adding most property prices were well ahead of where they were in 2019.
“Without doubt the froth is coming off, but most vendors are still enjoying substantial gains,” he said.
“In fact, plenty are still selling for 40 percent more than what the owners paid three or four years ago.”
He said one reason for the recent market downturn was the introduction of the Credit Contract & Consumer Finance Act (CCCFA) in December, which had made it impossible for some buyers to qualify for a loan.
However, he said those conditions were expected to ease soon as the CCCFA was currently under review with a view to making it easier for buyers to qualify for a loan.
And while interest rates were on their way up, he said there were still relatively low compared with historic averages.
“Interest rates have been rising but they’re still miles off where they have been in previous decades,” he said.
“Historically, they’ve tended to be around 6 or 7 percent on average for Kiwi borrowers.”
He said a 71 percent increase in the number of houses available for sale last month did not necessarily indicate vendors were prepared to accept a lower price.
“April saw a stand-off with many vendors refusing to budge while buyers kept their hands in their pockets,” he said.
“However, we’re starting to see more Kiwis meet the market, with some very satisfactory outcomes being achieved for both parties.”
source – RNZ
Consumer NZ launches petition for state-owned wholesaler
Consumer NZ has launched a petition calling on the government to do more to deliver “a fairer price” at the supermarket checkout.
In a petition to Consumer Affairs Minister David Clark, it asked the government to go beyond the Commerce Commission’s recommendations and set up a state-owned wholesaler or provide an access regime to smaller chains and new entrants.
Consumer New Zealand chief executive Jon Duffy said supermarkets were are taking “more than $1 million in excess profits” from shoppers every day.
“These profits are twice what they should be. We need more competition to drive down prices and give New Zealanders a fairer price at the checkout.”
Duffy told Morning Report in order to fix the supermarket duopoly, the government needed to play a larger role.
He said despite the profit that could be made in New Zealand’s competitive supermarket sector, over the past 20 years the country had not seen any new entrant.
Duffy said this was because of the lack of access to reasonably priced wholesale groceries.
“We think there’s a role for the government here to either enter the wholesale market itself and set up a wholesaling chain, which has a whole lot of advantages particularly when it comes to introducing sustainability into the supply chain,” he added.
The watchdog also suggested the government have a system where the existing supermarkets provide wholesale services to other players.
Duffy said this could be a more practical solution, and that hard regulations were needed to ensure supermarkets played fairly with the smaller players.
Countdown spokesperson Kiri Hannifin said in a statement they were actively working on the recommendations put forth by the Commerce Commission, including around voluntarily opening up wholesale supply.
She said while wholesale was not something they were currently set up to do, and it was extremely complex, they were well aware of the commission’s expectations.
Hannifin added that it disagreed with the Consumer NZ’s commentary around excessive profits.
“The fact is that once we pay tax, our net profit is 2.4c in the dollar, or $2.40 on a $100 shop”, the statement said.
“It’s misleading to suggest that we have control over price inflation and the kind of cost increases all of us are facing at the moment. We pay suppliers 63c in the dollar, and in New Zealand, 15 percent is added on top of all food.”
Duffy said there was no easy answer to fix the competition issue but in order to unravel 20 years of duopolistic behaviour, hard choices needed to be made.
“We are dealing with essential services here. We dealing with the ability of New Zealanders to put food on the table so we take this matter very seriously”, he said,
The Commerce Commission report
Released in March, the Commerce Commission’s report highlighted that New Zealand’s retail grocery prices appeared comparatively high by international standards and the profitability of major retailers appeared high.
To tackle this, it recommended that more land be made available for new grocery stores, by making changes to planning laws and banning the use of restrictive land covenants.
It also called for the improvements to be made to the wholesale supply of a range of groceries at competitive prices, by requiring the major retailers to consider any requests they receive to supply competitors.
Commerce and Consumer Affairs Minister David Clark said he had not ruled out going further than the Commerce Commission’s recommendations.
He told Morning Report the government accepted the commission’s findings and would announce its repines at the end of this month.
A government backed wholesaler was unlikely, he said, but he would give further consideration to a “regulatory backstop”. He said he had asked officials to have a look at the option of regulation on wholesale supply.
Consumer New Zealand sceptical about Countdown price freeze
The country’s consumer watchdog says Countdown’s move to freeze some of its prices is positive, but the supermarket’s profits are still sky-high.
Countdown is putting a temporary price freeze on 500 items over winter in response to the rising cost of living.
Countdown says it has identified a variety of winter staples including: tinned tomatoes, butter, cheese, sugar, flour, shaved ham and more.
Whatever price these are on 9 May is the price they will stay at for the winter months, no matter what happens with inflation.
Consumer New Zealand chief executive Jon Duffy said it was an acknowledgement that groceries were not affordable.
“This is an acknowledgement by Countdown of the role they have played in driving up the cost of living for a lot of New Zealanders around grocery prices, it’s a shame that it didn’t happen earlier but it’s good that we’re making progress.
“In my mind it does seem strange if we were to be applauding a duopolist from taking a pause from the excessive profits that they’re making on us just for winter and we should be asking about how we got to this place in the first place.”
The Commerce Commission has found that the supermarket sector is making more than $1 million in excess profits a day, Duffy said.
He said, even at the frozen prices, the items will still be bringing in big profits for the chain.
Duffy said it was likely Countdown had already paid for three months worth of supplies at a set price, so the supermarket might not lose much money.
He said although he applauds the sentiment behind what Countdown is doing, but the sector has been under a sustained period of negative public sentiment.
“So I think if anyone needs to be applauded it’s probably the shoppers of New Zealand who have really made their voice heard and it finally made it, I guess to the boardroom at Woolworths and it’s meant that Countdown has taken this move to address that negative public sentiment.”
Duffy said if there were normal competitive pressures on the supermarket sector, “this would have happened a lot earlier because Foodstuffs and Countdown would have been completing more on price”.
It is clear that competition is not working well for consumers, as highlighted in a Commerce Commission report, when the only way consumers can get a break is when one of the duopolists feels it is a good public relations move, he said.
It will be interesting to see how Foodstuffs which owns New World and Pak ‘n Save supermarkets deals with this price freeze, Duffy said.
He said in many places people only have the option of shopping at a Foodstuffs owned supermarket because that is the only option available.
Duffy said he does not think this will ultimately increase competition between the two supermarket chains because “the underlying market structure is broken”.
“The danger is it distracts from the problem still exists, really it’s just taking a minor pause on the excessive profits the duopoly are able to extract.”
He said it is likely Countdown prices will go back up again after the three month period ends. (Source – RNZ)
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