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What Will Musk Do With Twitter?

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Elon Musk has emerged from the battle over his $44bn takeover of Twitter to face an even more daunting task: trying to fix the social media platform he claims to love.

As the deal closed late on Thursday, a new era began for one of the most powerful communication tools to come out of Silicon Valley — but also for Musk himself, who can now add ‘social media mogul’ to his curriculum vitae.

The change in ownership has been welcomed by those who view the billionaire entrepreneur as the man to overhaul a struggling business they believe never reached its full potential. Already, the self-declared “Chief Twit” has outlined grand plans to inspire a faster pace of product innovation and shift into new revenue streams, while transforming to a leaner operation. On Thursday, he began cleaning house, firing top executives including chief executive Parag Agrawal and head of safety, Vijaya Gadde.

Other than being a prolific Twitter user, the mercurial Musk is a novice to the intricacies of the social media industry, where stocks including Meta, Alphabet and Snap suffered a devastating sell-off this earnings season amid continuing macroeconomic hardship.

Some experts note that he will now be elevated to a crucial political gatekeeper, given Twitter’s outsize importance among politicians and campaigns, and are fearful that his leadership could do more harm than good.

Musk has pledged to restore “free speech” to the platform and undo permanent bans, paving the way for former president Donald Trump to return as the US midterms loom just days away.

“We’ve seen people’s businesses and reputations rise and fall by what happens on Twitter, we’ve seen markets rise and fall by what happens on Twitter, we’ve seen elections rise and fall by what happens on Twitter,” said Joan Donovan, research director of the Harvard Kennedy School’s Shorenstein Center on Media Politics and Public Policy.

“Musk has intention here, he’s going to be led by his techno-libertarian politics.”

For users, advertisers, investors and staffers, the question is what’s next, and what are the implications of the Musk takeover for the social media platform?

Speech

Musk, who identifies as a “free speech absolutist”, has said he will respect the speech laws of each country, and reassured advertisers on Thursday that Twitter “cannot become a free-for-all hellscape”. Rather, users will have the freedom to choose their “desired experience according to [their] preferences”, he said.

He will also toss out permanent bans, telling the Financial Times in an interview in May that he would allow Trump back on the platform after he was booted off in the wake of the January 6 attack on the US Capitol in 2021.

Casey Mattox, senior fellow at the Charles Koch Institute, is among those who welcome a Musk takeover, arguing that he is likely to move Twitter to a fairer, less “centralised system” for moderating content, towards user-determined content moderation.

But some speech academics warn that Musk’s approach could open the floodgates to toxicity, hate, extremism and misinformation, arguing that it ignores the risk of platform manipulation.

“Musk frequently talks about Twitter as a ‘digital public square,’ which conjures up quaint images of individuals with equal voices exchanging ideas,” said Eddie Perez, who sits on the board of the OSET Institute, an election security non-profit organisation, and used to be Twitter’s director of product management.

“That’s naive; it’s often more akin to well-resourced asymmetric warfare, with bad actors [and] nation-states working in the shadows to try to manipulate the platform and amplify disinformation.”

Others question whether Musk could be susceptible to pressure from foreign powers, particularly given his recent public positions on the Russia-Ukraine conflict, calling publicly for a negotiated settlement to end the war in the country, and the praise he received from Beijing for comments on Taiwan.

Everything app

Either way, Musk has an uphill battle ahead. In buying Twitter, Musk inherits a company that has long struggled to grow at the same pace as rivals or develop a compelling advertising offering, according to multiple people in the industry.

Musk himself acknowledged last week that he and investors were “obviously overpaying” when paying $54.20 a share for Twitter, leaving him under pressure to deliver for those who backed the deal during a wider economic downturn.

Musk previously said that Twitter needed to “get healthy” and he would cut jobs and costs to deliver this. This will involve overhauling management; text messages revealed as part of Musk’s legal battle with Twitter showed that he had been inundated with recommendations from associates for top roles. But Musk only floated one name himself as a potential board member: chat show host Oprah Winfrey.

He suggested that he would not appoint any C-suite management positions at all, writing that he would personally “oversee software development”. Musk is also likely to gut Twitter’s relaxed remote working culture in favour of the long-hours, in-office workplaces that he is known to run at his other companies, which could lead to clashes with staff.

At the centre of his plan for the social company, Musk has hinted that he wants to build a WeChat-style superapp, tweeting: “Buying Twitter is an accelerant to creating X, the everything app”. These are apps that typically allow users to message, shop, send payments or order taxis all in one place — and are popular in China where antitrust laws are less stringent than the US. 

In an early presentation to investors, he promised to quintuple revenues by 2028 to $26.4bn compared with 2021 and reach 931mn users, up from about 238mn today, according to someone familiar with the document. The boost would come from a new payments business, as well as subscriptions and data licensing.

Changpeng Zhao, chief executive of Binance, which was one of the equity investors in the deal, said in a statement on Friday that he hoped to help Musk “realise a new vision for Twitter”, including broadening “the use and adoption of crypto and blockchain technology” — signalling that cryptocurrencies might form part of Musk’s payments plans.

Donovan noted that Musk, a co-founder of PayPal, might look to turn Twitter into a banking entity given his background, but warned: “If Musk is truly as anti-establishment as he has pointed himself out to be, then there is a risk of him destabilising currencies with the power of these Twitter networks.”

Others are more enthusiastic about Musk’s prospects when it comes to boosting the business.

Musk has suggested that the company will shift away from relying so heavily on advertising in future — down to 45 per cent of revenues by 2028 from around 90 per cent in 2021. However, on Thursday he sought to woo brands, posting that it was “essential to show Twitter users advertising that is as relevant as possible to their needs”.

Pinar Yildirim, associate professor of economics and marketing at the Wharton School of the University of Pennsylvania, said that Twitter “has a lot of potential to deliver a high-quality user base to advertisers” and that Musk clearly understands that “advertising will have to be more efficient on Twitter”. 

She added: “This is a low-hanging fruit, it’s not a difficult thing for Twitter to improve. Once they have done this I’m sure Twitter will be able to attract more advertisers.”

Much will depend on Musk’s approach to speech, however, as some advertisers are already nervous that Twitter will no longer remain a safe place for brands if it becomes a hotbed of toxicity and abuse.

Kieley Taylor, global head of partnerships at global advertising group GroupM, said that some of her clients’ brands told the agency to suspend their advertising on Twitter if Trump’s account is reinstated, for example. The Wall Street Journal first reported news of the brands’ requests.

“Twitter’s major advertisers should make it clear right now that if Musk rolls back the brand safety policies that he has said he was going to roll back, that they plan on walking immediately,” Angelo Carusone, president of left-leaning non-profit Media Matters, wrote, on Twitter.

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Source: ft.com

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Iceland Introduces ‘turkey Promise’ to Ensure Shoppers Get ‘low Price’ Meat

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Iceland has frozen the price of its festive fowl.

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Bankman-Fried Empire Includes Billions of Dollars of Illiquid Investments

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Sam Bankman-Fried’s business empire includes billions of dollars of illiquid venture capital investments, according to internal records seen by the Financial Times, underscoring the uncertain recovery facing customers of his collapsed FTX exchange.

The 30-year-old entrepreneur, once a star of the crypto industry, on Friday placed FTX international, its independent US arm, and his proprietary trading firm Alameda Research into a joint bankruptcy process in Delaware federal court.

Initial filings listed both assets and liabilities of the group at between $10bn and $50bn. FTX’s new chief executive John Ray, who was brought in to chair Enron during its liquidation, said the companies had “valuable assets” and that the bankruptcy would maximise recoveries.

The sprawling venture capital portfolio will add to the complexity of the insolvency proceedings, which itself includes more than 130 companies controlled by Bankman-Fried. FTX’s collapse is among the most dramatic failures in the crypto industry not just this year, but since the creation of bitcoin more than a decade ago.

FTX and its affiliates have not yet disclosed the exact size of their liabilities and assets, and the shortfall that likely exists. FTX’s recently departed head of institutional sales, Zane Tackett, said on Twitter on Friday that the shortfall ran into billions of dollars. FTX did not immediately respond to a request for comment.

Any gap between assets and liabilities will be influenced by the value that can be recovered from almost $5.4bn that FTX and Alameda invested in almost 500 crypto companies and venture capital funds, according to the records seen by the FT.

The largest of those investments is $1.15bn that Alameda ploughed into crypto mining group Genesis Digital Assets between August 2021 and April 2022, the records show.

Publicly traded mining companies have sold off sharply over the past year as the crypto market has declined. The HashRate crypto mining index, which tracks such stocks, is down 75 per cent since August 2021. Genesis did not immediately respond to a request for comment.

The records also list more than $1bn invested across about 40 funds run by venture capital firms, including some that were investors in FTX such as Sequoia Capital. Those holdings include a $300mn investment by Alameda in K5 Global, the firm run by Michael Kives. The investment amounts to 30 per cent of K5’s general partnership, and $225mn of the total sits in Elon Musk’s SpaceX and Boring Company, and other unidentified businesses, according to the records.

Earlier this year, texts released during Musk’s litigation with Twitter showed Kives suggesting Bankman-Fried as a co-investor in the social media company. Musk was dismissive of the FTX founder and ultimately took money from the head of rival exchange Binance, Changpeng Zhao.

Other big bets detailed in the records include a $500mn investment in Anthropic, an artificial intelligence “safety and research company”, made by Bankman-Fried through Alameda earlier this year. Anthropic did not immediately respond to a request for comment.

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Sam Bankman-Fried’s $32bn FTX Crypto Empire Files for Bankruptcy

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FTX, the once high-flying crypto currency group, has filed for bankruptcy protection in the US, marking a stunning collapse of the $32bn empire built by the colourful 30-year-old entrepreneur Sam Bankman-Fried.

The filing in Delaware federal court on Friday included the main FTX international exchange, a US crypto marketplace, Bankman-Fried’s proprietary trading group Alameda Research and about 130 affiliated companies.

FTX’s failure came after Bankman-Fried desperately sought billions of dollars to save the exchange this week after it was unable to meet a torrent of customer withdrawals in a run prompted by concerns over its financial health and links to Alameda.

The collapse of such a prominent group, which advertised during the US Superbowl and whose shorts-wearing, charismatic founder was a leading donor to the Democratic party, has rocked the notoriously volatile crypto industry.

Bitcoin dropped 5 per cent to a fresh two-year low of $16,492 after the FTX bankruptcy was announced. Changpeng Zhao, chief executive of Binance, earlier on Friday said the fall of FTX left crypto facing a financial crisis akin to 2008 and that more businesses could fail in its wake.

Bankman-Fried, who one week ago was among the most respected figures in the sector with a $24bn personal fortune and close links with Wall Street and celebrities, resigned as FTX’s chief executive on Friday. John R Ray, a restructuring specialist who oversaw the Enron and Nortel Networks bankruptcy cases, will take the reins.

“The FTX Group has valuable assets that can only be effectively administered in an organised, joint process,” Ray said.

In just over three years, FTX had secured a $32bn valuation and had wooed a roster of blue-chip investors, including Paradigm, SoftBank, Sequoia Capital and Singapore’s Temasek. Venture capital firms Sequoia and Paradigm have in recent days marked their investment down to zero.

The sprawling business empire run by a tight-knit group of longtime associates around Bankman-Fried, many of whom lived together in a Nassau penthouse in the Bahamas, has around 100,000 creditors and $10-50bn of assets and liabilities, according to the filing.

The US Securities and Exchange Commission is investigating FTX, which includes examining the platform’s cryptocurrency lending products and the management of customer funds, according to a person familiar with the matter.

The bankruptcy filing follows a frantic week in digital asset markets. Rumours about the financial health of FTX and its trading affiliate Alameda Research culminated on Monday in a run on the exchange with insufficient readily accessible assets to meet $5bn in customer withdrawals.

After appeals to its investors and rival exchanges, FTX halted the demands on Tuesday and agreed a rescue by the world’s largest crypto bourse, Binance, led by Zhao, a one-time partner turned arch-rival of Bankman-Fried.

That deal fell through a day later after Binance said due diligence revealed insurmountable financial problems at FTX. Last-ditch efforts to find another investor to supply up to $8bn failed in recent days.

FTX Digital Markets Ltd, the group’s subsidiary in the Bahamas, where it is headquartered, is not included in the bankruptcy proceedings. The Securities Commission of The Bahamas froze the subsidiary’s assets on Thursday and appointed a provisional liquidator.

LedgerX, a regulated US futures exchange, and a subsidiary in Australia are among other units not included in the filing. The group’s Australian business has already been placed into administration while Japanese watchdogs suspended operations of FTX’s affiliate in the country.

Bankman-Fried has blamed mistaken accounting of the exchange’s liquidity and leverage for the collapse.

“I’m really sorry, again, that we ended up here,” he said following Friday’s filing. “I’m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week.”

Additional reporting by Stefania Palma in Washington

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Article: ft.com

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