How to Democratize Twitter & Get Musk Back a Bit of His Money

Elon Musk’s takeover of Twitter at a price of $44 billion dollars took one of the internet’s largest public forums out of ‘public’ ownership and moved it into private hands.  Since his takeover the debate around the direction Musk is taking Twitter has been vitriolic, as well as financially damaging – as seen from the abandonment of the platform by many advertisers.  There has also been considerable angst related to the use of the platform by its new owner and the threat that what was a fairly ‘open’ platform becoming driven by the whims of a single individual despite an initial commitment to free speech.

What has become quite clear despite all of this is that, for Twitter, both the former and current ownership models appear to be failures when it comes to financial and societal potentiality and outcomes.  However, this need not be the case and there may be a way to make Twitter more democratic and allow Elon Musk to recoup some of his personal wealth.  What I propose below is one possibility of how this could be done.  Musk and his supporters may not recoup their $44B but it might stave off bankruptcy and move the forum back in a direction of both open speech – within limits – and remove many of the problems related to anonymous and bot accounts on the platform.

The basic logic of what I am proposing is unique in form but not in common logic from others who have proposed a cooperative model for social media.  Andrew Hill discussed how a cooperative ownership model might be appropriate for social media companies like Twitter.  Following the co-operative logic, James McRitchie (a lawyer) and Steffen Sauerteig (a Twitter shareholder), put forward a shareholder proposal at the 2017 stockholder meeting titled “Stockholder Proposal Regarding a Report on Users Owning the Twitter Platform” that received support of those holding 5 percent of the shares.  However, given the diversity of viewpoints from a broad shareholder base the proposal had no real hope of ever being enacted.

Despite its appeal, a cooperative model, such as the McRitchie-Sauerteig proposal, has limitations and generally does not scale well except in certain industries and circumstances.  Yet, there are many examples of large-scale cooperatives – such as REWE in Germany, Credit Agricole in France, and Nippon Life in Japan – that have operated with a user-owner model very successfully for decades.  What I propose for Twitter is a hybrid public-cooperative model that allows for flexibility in investing in the company, but with that ownership being restricted to user and with the governance dedicated to a specific set of principles.  Here is the beginning of a 10-point plan.

1. Twitter would be reformulated as a B-Corp with a commitment to funnel future dividends (or a minimum percent thereof) to the cause of democracy and free speech.  Individuals could allocate up to 100% of their dividend payments to specific causes as determined by the Board of Directors.  Unlike a co-operative the user can choose to take some maximum set level of dividends (to be determined initially by the board).
2. Anyone with a current Twitter account with minimum usage would be granted 1 share of Twitter stock.  This would apply to any corporate or personal account.  The share issue would be limited in time (e.g., for 3 months from the announcement date) and would require the same legal identification that would apply on major stock exchanges so that the account could be verified for the purposes of the deposit and accounting of dividends.
3. Anyone with an active Twitter account would be able to purchase up to 9 more shares of Twitter stock at an IPO price to be determined.  All share ownership would be public with the ‘blue’ tick being replaced by the number of shares held.
4. No one would be permitted to hold more than 10 shares of Twitter stock.  How corporate subsidiaries, brands, government bodies, etc. could hold various accounts would need to be determined but is not insurmountable.  It may also be that corporate, government, and other specified accounts could be issued a different class of non-voting stock or required to donate all of their dividends. Advertising fees would be charged in line with current practices. 
5. Anyone wishing to join Twitter in the future would have to purchase at least one share of Twitter stock at the reigning market price for whatever class of shareholder they may be.  There would be a specific class of ‘gratis’ shares that could be used for NGOs, Charities and other groups and individuals, subject to approval by the company.
6. Twitter shareholders, while not being able to own more than 10 shares, could collectively form coalitions with the intent of voting their shares as a block.
7. Anyone wishing to close their account would receive the reigning market price for their shares.  Closing one’s Twitter account would automatically be linked to a sale order.
8. Anyone violating Twitter’s use policy (e.g., w/r to hate speech, etc.) would have their account suspended, including any claim to dividends during the period of suspension.  They could, however, sell their shares and close their accounts.
9. As the platform expanded, the board would have the capability of increasing the number of shares within limits.
10. All other aspects of governance would be in accordance with the rules of B-Corps and the designated stock exchange used to transact shares.

Of course, the specifics related to the above would need to be worked out, but it has the benefit of: (a) a better validation and certification method than simply paying for a ‘blue tick’ – one cannot remain anonymous to the organization; (b) it removes the threat of fake accounts by linking users to ownership; (c) it allows Twitter users to ‘vote’ via their shareholding and form coalitions to support policies of their choice; (d) it brings Twitter back into ‘public’ ownership and hence opens up its management and governance to scrutiny; and (d) it allows the users to benefit financially and socially from the platform’s success.  It also allows Elon Musk a way to minimize his losses and exit Twitter easily and quickly.

The financials of this are speculative but a rough estimate implies that Twitter could be valued at up to nearly $40 billion.  Currently Twitter has approximately 250M users.  If we look at a valuation of approximately $30 per share to current users (the price before Musk’s foray), they will hold $7.5 Billion in equity from their granting of one share each.  Note that this would not translate into cash but would be booked as Shareholder’s Equity (offset by Goodwill).  If we assume that, on average, users choose to purchase an additional 5 shares at the IPO price, this will take the total valuation to $37.5 Billion.  This would be booked as additional shareholders equity and generate the equivalent in cash.  Of course, the above is a very quick-and-dirty back of the envelope calculation that most likely overestimates who would buy into Twitter (and also does not get into the complication of different prices for different classes of shares) but it highlights a mixture of a cooperative model (users get a shareholding) and a traded-company (more investors can come it, provided they are also users in some form).

Ultimately, of course, Elon Musk and those backing him would have to buy into the model and agree to give up ownership to the new entity.  But with many (literally millions) fewer decision makers involved than with the McRitchie-Sauerteig proposal in 2017, such a outcome may be more achievable. With the above assumptions, there would be upwards of $37.5B in cash to do a deal. But, in reality, the ‘new’ Twitter would need cash for operations, and it is hard to envision Musk and his backers recouping their $44B.  This, however, is not necessarily a bad thing.  Musk’s exposure at the time of the takeover was approximately $25B, with the rest being other equity investors (about $7B) and debt holders ($13B).  The debt holders can be rolled over into the ‘new’ Twitter (if they agree that the new model works for them).  The bigger issue would be what Musk and the other equity holders would agree to as a going-away price.  Given the massive reduction in Musk’s wealth in the last year – much of which is attributed to the distraction to Musk’s attention that Twitter has created – it may that the second order effect of Musk being able to get back to Tesla and other ventures would sufficiently revive the value of those operations to make a deal very workable.

So, Twitter is not a lost cause, nor is the form it has used sacrosanct.  With some ingenuity it could become the public forum we need and meet the call by Jack Dorsey for ‘public ownership’: “It’s critical that the people have tools to resist [government and corporate control], and that those tools are ultimately owned by the people. Allowing a government or a few corporations to own the public conversation is a path towards centralized control”.

This text of this article is a slightly longer and differentially edited version of what was published in The Conversation. That article can be accessed here (https://theconversation.com/twitter-how-to-remove-elon-musk-and-reinvent-the-company-197932)