Elon Musk, the CEO of Tesla, has made a bid to buy Twitter for $43 billion.

(Reuters) – Elon Musk, the CEO of Tesla, has gone from a popular Twitter contributor and critic to the company’s largest individual shareholder to a potential owner of the social platform in just ten days — a flurry of activity that could drastically alter the service given the billionaire’s self-described free-speech absolutism.

Musk has offered to acquire Twitter altogether for more than $43 billion, according to a securities filing Thursday, saying the social media network “needs to be changed as a private firm” in order to build trust with its users.

In the filing, Musk stated, “I believe free expression is a societal requirement for a functioning democracy.” “I’ve realised that in its existing shape, the company will neither grow nor satisfy this societal mandate.”

“Having a public forum that is maximally trusted and broadly inclusive is vitally important to the future of civilization,” he said later in the day during an onstage interview at the TED 2022 conference.

“Since its inception in 2006, Twitter has been a thriving hub for social and political commentary, sharing news, scandal gossip, cat memes, and clothing colour debates.” However, it has also created a forum for viral disinformation and lies, bullying and hate speech, and troll groups that may shout down posters they disagree with by unleashing tidal waves of ugly pictures, threats, and other forms of online harassment.

Twitter has put forth a lot of effort to curb the latter while keeping the former — but not necessarily in ways that are satisfactory to the majority of users. It has put limits on tweets that threaten violence, advocate hatred, intimidate others, or spread disinformation, just like other platforms. Following the 2021 Capitol insurgency, Twitter decided to block former President Donald Trump based on these criteria.

Twitter has also become a gathering place for corporations and marketers, many of which prefer stricter content guidelines, as well as a platform for high-profile people like Trump and Musk, who have used it to rally fans and promote commercial initiatives.

Musk, who has referred to Twitter as a “de facto town square,” highlighted some concrete potential changes on Thursday — such as preferring temporary bans over permanent bans — but has primarily defined his goal in broad and general terms.

He stated that he intended to open up the “black box” of artificial intelligence technology that drives Twitter’s feed so that people could see why some tweets go viral while others fade away. “I wouldn’t be changing tweets myself,” he continued, “but you’d know if something was done to boost, demote, or otherwise affect a tweet.”

The billionaire has been a vociferous opponent of Twitter, claiming that it does not adhere to free-speech values. Followers of Trump and other right-wing politicians have had their accounts suspended for violating the social media platform’s content policies on violence, hatred, and damaging disinformation. Musk has called himself a “free-speech absolutist,” yet he is also renowned for barring Twitter users who challenge or disagree with him.

While Twitter’s user base is far lower than that of competitors such as Facebook and TikTok, celebrities, world leaders, journalists, and intellectuals use the service. Musk has 81 million followers on Twitter, which puts him on par with musical icons like Lady Gaga.

Twitter’s stock ended the day at $45.08, down slightly under 2%, much below Musk’s offer of $54.20 per share. This is usually a sign that some investors are sceptical about the deal’s success. The stock is still trading below its 52-week high of $73.

Musk called that price his final offer, but he didn’t say how he’d pay for it. The offer is non-binding and is contingent on funding and other factors.

Twitter said it will consider whether accepting the offer is in its shareholders’ best interests. However, it’s uncertain how Twitter’s board of directors will react after reviewing the offer. According to John Coffee, a professor at Columbia University’s law school and the director of the university’s corporate governance department, it will likely bargain for a higher per-share price or clauses to ensure that the board remains independent of Musk.

If Musk’s shareholding climbs to 10% or 15%, the board might adopt “poison pill” provisions to offer more shares and reduce the value of Musk’s holdings, Coffee added. Even if that happens, Musk could still acquire control of the firm through a proxy struggle in which he votes out the current board of directors.

Musk stated at the TED conference that he had the funds. “I could theoretically afford that,” he joked.

Musk is expected to be able to raise the $43 billion he needs if he goes ahead with his takeover bid, maybe by borrowing billions and using his Tesla and SpaceX stakes as collateral.

The majority of Musk’s fortune, which Forbes estimates to be about $265 billion, is invested in Tesla stock. The corporation permits executive officers to use their shares as collateral for loans, but only up to 25% of the value of the pledged shares can be borrowed.

Musk has 172.6 million shares worth $176.47 billion, according to data provider FactSet. According to a Tesla proxy filing, just over 51% of his stock has already been pledged as collateral. That means Musk could borrow $21.5 billion with the remaining ownership. He may potentially take out a loan against his SpaceX stock, which is kept privately.

Musk revealed in recent regulatory filings that he began buying Twitter shares in virtually daily batches on Jan. 31, and that he now owns about 9% of the company. Only Vanguard Group has a larger proportion of Twitter. Musk allegedly improperly delayed revealing his position in the social media business in order to buy additional shares at lower prices, according to a lawsuit filed Tuesday in federal court in New York.

According to Chester Spatt, a former SEC chief economist, the SEC might punish Musk for causing harm to other investors by failing to disclose his purchase of Twitter shares in a timely manner, but it’s unlikely that it will do anything to prevent a takeover.

“This is likely to play out fairly fast,” said Spatt, who currently teaches finance at Carnegie Mellon University.

It’s tough to prove an investor’s purpose in disclosure cases, according to Jacob Frenkel, a former SEC enforcement attorney now with the Dickinson Wright legal firm in Washington. “Just because there was a disclosure violation does not mean there was fraud,” Frenkel added.

However, according to Frenkel, there is “ample fodder for an investigation” into whether anyone with knowledge of Musk’s stock acquisitions traded in the shares before Musk’s public statements.

Musk was promptly awarded a position on Twitter’s board of directors after announcing his interest, on the condition that he did not control more than 14.9 percent of the company’s outstanding stock. However, five days later, the corporation announced that he had declined. Musk proposed substantial changes to the firm in a series of now-deleted and not-always-serious tweets, including removing adverts — the company’s primary source of revenue — and converting its San Francisco headquarters into a homeless refuge.

As a result of the 180-degree reversal, CEO Parag Agrawal warned employees earlier this week that “there would be distractions ahead” and that they should “tune out the noise and keep focused on the work.”

Last year, Twitter did not perform as well as its social media competitors, and it lost money. The company reported a net loss of $221 million in 2021, which was mostly due to the settlement of a shareholder lawsuit alleging that the company misled investors about how large its user base was growing and how much users interacted with its platform. Jack Dorsey, the company’s co-founder, resigned as CEO in late November and was succeeded by Agrawal.

“I’m not saying I have all the solutions here,” Musk added, “but I do believe we should be very hesitant to delete anything and very cautious with permanent bans.” “It won’t be flawless,” he remarked, but “as free as reasonably possible” speech should be perceived and realised.