After a saga more drawn out the Fast and Furious movie franchise, Elon Musk is the owner of Twitter Inc (NYSE: TWTR).
Sixteen years on from the first-ever tweet, by former CEO Jack Dorsey, Twitter is in the hands of the enigmatic billionaire. So, now that it is all said and done, how did Twitter investors fare?
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- jack (@jack) ມີນາ 21, 2006
Twitter vs the stock market
Twitter IPO’d nearly 9 years ago to the day. In retrospect, this was a great time to do so – it was launched amid one of the longest bull runs in history, an environment awash with limitless money, basement-level interest rates and a booming tech sector.
By Christmas, it was already up 62% from its IPO. But honestly, it kind of peaked there.
I plotted the share price over the entire time it was public – that is the nine years between November 2013 and today – against the S&P 500. While the latter has netted investors 115% over this period, Twitter has returned a paltry 19% – and that’s only after Musk purchased it for a premium, with it trading up 40% in the last two months.
Not only has it underperformed SPX, but it has seen competitors brush past it, too. Even the embattled Meta – known as Facebook in a past life – has dominated Twitter (even after its earnings disasterclass ອາທິດທີ່ແລ້ວ).
Why has Twitter been so bad?
Twitter has had trouble with its long-term vision for a while. It only recently rolled out the Twitter Blue feature, a subscription service which offers features such as an edit button. Even then, the service is only available in a select few countries – something Musk has already indicated he will change.
Several executives have also been jettisoned, as the Tesla chief looks to drastically shake things up. Another monetisation angle Musk wants to pursue is the verification process, with rumours circulating that he will charge up to $20 per month for the coveted blue tick.
This makes sense, to me at least. Twitter lagged behind rivals for too long, not really knowing what its identity was and what its long-term goal was. Not only will these charges help with monetisation, but they will also help with bots.
Who rules the world? Bots
Bot accounts have been the biggest source of controversy throughout this Twitter deal and the reason that it took so long to go through. Twitter has insisted throughout that bots make up less than 6% of its daily active users, something which Musk’s team contested.
There is no doubt it is a massive problem. I’ll tweet out this article one it is live, and without doubt there will instantly be a couple of bot replies below it advocating for a purchase of GoingToTheMoonDogeCoin, or telling me about a professional trader who can “help a lot, turning $100 to $10,000 in one week”.
But Twitter’s bots and monetisation problems are not the only things that Musk aims to shake up. The other is free speech and censorship.
Trump responded on his own social media platform, Truth Social, that he is “very happy that Twitter is now in sane hands”. Indeed, the controversy around Twitter’s handling of the polarising former President’s rhetoric didn’t help matters at all, and is one of the reasons that Musk listed as a motive for taking over the company.
This is where we get into dicey territory – is it healthy for a company with this much influence to be privately listed? Who knows, but there are few characters who draw as many passionate opinions – positive and negative – as Mr Musk. I guess we just have to hope that those who see the good in him are right.
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But for investors, Musk’s deal brings to a close a chapter of their investing careers that they likely are happy to end. Not only is the takeover ratified in a time of tech stocks getting crushed, but Twitter was never a good investment in the first place – as the above charts showed.
Musk has cut their losses, or maybe even thrown them an olive branch, depending on how bearish you were on Twitter’s prospects.
And one more thing – it is yet another reminder of how difficult it is to beat the market, something I lament all the time.