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According to N.N.Taleb, Elon over-paid for twitter. $44 billion for a company that is according to Taleb ~15Billion. Now that cheap money era is over, Companies

According to N.N.Taleb, Elon over-paid for twitter. $44 billion for a company that is according to Taleb ~15Billion. Now that cheap money era is over, Companies esp. in tech have to spend based on their cash-flow and profit instead of valuation. That means, Elon has to pull at almost all stops to make Twitter profitable and that means a lot of pain and change at Twitter. Every change need not make it front page of HN. The tactics may be new, but the strategy is as old as it gets.

m3kw9 4y ago
He wouldn’t have have gotten it for 15. Unless there was a huge crash that sent it down to 10 first.
- BitwiseFool 4y ago
  And, the broader market crash would have also hit Elon Musk's own holdings as well. So I'm not sure how much better of a deal he would have gotten in terms of price and purchasing power.
  - Marazan 4y ago
    Tesla is down 40% since the start of the year. The stock market as a whole is not doong great. Twitter's share price was only so high because some idiot promised to pay 44 billion dollars for it.
    - andsoitis 4y ago
      And when you're the only person bidding for something...
- notyourwork 4y ago
  And frankly he should not have bought it at all.
Hamuko 4y ago
I think there's a lot of variance in how much analysts are valuing Twitter; Dan Ives is valuing Twitter at $25 billion. Kevin O'Leary (of Shark Tank fame) valued Twitter at only $10 billion. But I think all analysts are agreeing that Elon Musk paid way over market price.
- datalopers 4y ago
  Don't need to be an analyst: * SNAP is -87% from 2021 peak * META is -75% from 2021 peak * PINS is -70% from 2021 peak * TWTR was acquired for -30% ($44B) from 2021 peak, -70% to -80% gives us $12-18B valuation sans Musk.
  - concinds 4y ago
    Those aren't ideal comparisons; Meta's embroiled in its own problems, and Snapchat is losing users. Pinterest is also widely-hated and practically dead. Twitter was unprofitable, but people generally accept that for companies with consistent user growth. The valuation without Musk would likely have been around $25B to $35B. "$10B" is the fundamental DCF valuation, which isn't what anything is traded at these days, even after the tech crash.
    - datalopers 4y ago
      That's tough to debate since you're arguing the unknown. How about this instead. Musk revealed his stake on April 4th and his intent to acquire on April 14th. One could argue the TWTR rally across March was due to Musk buying his ~10% stake in the first place but we'll ignore that. July 1st, 2021 to April 1st, 2022 * TWTR: -42% * META: -37% * SNAP: -44% * PINS: -69%
    - Hamuko 4y ago
      >Snapchat is losing users So is Twitter. https://www.reuters.com/technology/exclusive-where-did-tweeters-go-twitter-is-losing-its-most-active-users-internal-2022-10-25/ https://www.reuters.com/technology/exclusive-where-did-tweet...
nonameiguess 4y ago
He doesn't "need" Twitter to ever be worth anywhere near what he paid. As long as he can make the debt service payments, he can die with Twitter still in the red and he'll die with more in the bank and a higher quality of life than you, me, and Taleb. All the usual business calculus kind of goes out the window when you have a single owner that only needs to stay afloat and may not care about maximizing profit or value.
- LordDragonfang 4y ago
  Of course, the counterargument is that all of Elon's moves so far have been exactly consistent with a new owner who only cares about profit. Cutting staff, implementing draconian crunch time, telling advertisers things that are what they want to hear but the opposite of what you're telling the public, adding fees where they weren't there before, raising prices and cutting features...
- watwut 4y ago
  He has to maximize profit. Otherwise he won't be able to pay that debt. It is not like he has a choice there, he took on huge debt and even maximized profit might not be enough.
  - s1artibartfast 4y ago
    I think you are missing the point. If he wants to, he could simply off the debt, or run at a ~1 billion loss for the rest of his life. That said, it is likely that he want to make a profit, at least on an annual basis, if not overall ROI
    - watwut 4y ago
      > If he wants to, he could simply off the debt, or run at a ~1 billion loss for the rest of his life. Can he actually off the debt without endangering his other businesses? Do you really think 1 billion yearly loss is something he can be comfortable with? His worth is in propery and businesses mostly, he does not have it sitting in a bank. That is the thing. He needs to maximize profits in order to ... not be in huge loss. Like, yeah, this is political project of his and it is both celebrated (by political side that gains by him owning it) and yelled about (by political side that is about to be pushed away from there) for political reasons. But, that does not mean he can have it as complete looser - if nothing for ego reasons. And his initial moves are moves of someone desperate to save some cash and panicking.
j0hnyl 4y ago
Twitter has over $5B in annual revenue, it will be fine.
- phailhaus 4y ago
  It only managed that in 2021, and still recorded a loss of $221M. In 2020 it made $3.7B, so the 2021 bump may have been pandemic-driven. [1] [1] https://www.businessofapps.com/data/twitter-statistics/ https://www.businessofapps.com/data/twitter-statistics/
  - com2kid 4y ago
    Lay off 1000 employees and start cutting or renegotiating vendor contracts. 221M should be easy money to find for a company of Twitter's size. I say this as someone whose been a big tech co employee my entire life and who has seen how easily 10 or 20 million gets spent. I have also seen how easily a million gets thrown out here or there for vendors to do some data analysis work, or even worse, create shiny powerpoint slides to present to higher ups. Remove a layer of management, stop all the outsourced make-work, and you may end up halfway there to saving 200 million.
    - jsnell 4y ago
      Musk has saddled Twitter with a lot of debt as part of this deal. The interest on that debt is about $1 billion / year. So they don't need to just find $200M, they need to find $1.2B. Does it still sound easy?
      - com2kid 4y ago
        1.2B is a bit harder, yeah. I guess I should have stated that Twitter could have been profitable awhile back, and it was likely a choice they made to not be. Not sure why they made that choice, and it seems like everyone who does know why no longer works there. My overall point was that large corporations have a lot of waste in them, entire teams dedicated to making shiny dashboards for execs who only ever look at them once or twice a year, or, something I saw at Microsoft, hiring vendors to write software, and also hiring another vending firm to manage the first vending firm. (Because MS, despite being filled with program managers and software developers, wasn't set up at the time to do short term projects so the easiest solution to that organizational problem was to flush a few million extra down the tubes...)
s1artibartfast 4y ago
Price overpaid also has to consider Tesla stock loss as well as the general market. TSLA is down ~45%. Elon sold 15B of Tesla stock to finance the deal and presumably 11B of other assets.

m3kw9 4y ago

He wouldn’t have have gotten it for 15. Unless there was a huge crash that sent it down to 10 first.

BitwiseFool 4y ago
And, the broader market crash would have also hit Elon Musk's own holdings as well. So I'm not sure how much better of a deal he would have gotten in terms of price and purchasing power.
- Marazan 4y ago
  Tesla is down 40% since the start of the year. The stock market as a whole is not doong great. Twitter's share price was only so high because some idiot promised to pay 44 billion dollars for it.
  - andsoitis 4y ago
    And when you're the only person bidding for something...
notyourwork 4y ago
And frankly he should not have bought it at all.

Hamuko 4y ago

I think there's a lot of variance in how much analysts are valuing Twitter; Dan Ives is valuing Twitter at $25 billion. Kevin O'Leary (of Shark Tank fame) valued Twitter at only $10 billion. But I think all analysts are agreeing that Elon Musk paid way over market price.

datalopers 4y ago
Don't need to be an analyst: * SNAP is -87% from 2021 peak * META is -75% from 2021 peak * PINS is -70% from 2021 peak * TWTR was acquired for -30% ($44B) from 2021 peak, -70% to -80% gives us $12-18B valuation sans Musk.
- concinds 4y ago
  Those aren't ideal comparisons; Meta's embroiled in its own problems, and Snapchat is losing users. Pinterest is also widely-hated and practically dead. Twitter was unprofitable, but people generally accept that for companies with consistent user growth. The valuation without Musk would likely have been around $25B to $35B. "$10B" is the fundamental DCF valuation, which isn't what anything is traded at these days, even after the tech crash.
  - datalopers 4y ago
    That's tough to debate since you're arguing the unknown. How about this instead. Musk revealed his stake on April 4th and his intent to acquire on April 14th. One could argue the TWTR rally across March was due to Musk buying his ~10% stake in the first place but we'll ignore that. July 1st, 2021 to April 1st, 2022 * TWTR: -42% * META: -37% * SNAP: -44% * PINS: -69%
  - Hamuko 4y ago
    >Snapchat is losing users So is Twitter. https://www.reuters.com/technology/exclusive-where-did-tweeters-go-twitter-is-losing-its-most-active-users-internal-2022-10-25/ https://www.reuters.com/technology/exclusive-where-did-tweet...

nonameiguess 4y ago

He doesn't "need" Twitter to ever be worth anywhere near what he paid. As long as he can make the debt service payments, he can die with Twitter still in the red and he'll die with more in the bank and a higher quality of life than you, me, and Taleb. All the usual business calculus kind of goes out the window when you have a single owner that only needs to stay afloat and may not care about maximizing profit or value.

LordDragonfang 4y ago
Of course, the counterargument is that all of Elon's moves so far have been exactly consistent with a new owner who only cares about profit. Cutting staff, implementing draconian crunch time, telling advertisers things that are what they want to hear but the opposite of what you're telling the public, adding fees where they weren't there before, raising prices and cutting features...
watwut 4y ago
He has to maximize profit. Otherwise he won't be able to pay that debt. It is not like he has a choice there, he took on huge debt and even maximized profit might not be enough.
- s1artibartfast 4y ago
  I think you are missing the point. If he wants to, he could simply off the debt, or run at a ~1 billion loss for the rest of his life. That said, it is likely that he want to make a profit, at least on an annual basis, if not overall ROI
  - watwut 4y ago
    > If he wants to, he could simply off the debt, or run at a ~1 billion loss for the rest of his life. Can he actually off the debt without endangering his other businesses? Do you really think 1 billion yearly loss is something he can be comfortable with? His worth is in propery and businesses mostly, he does not have it sitting in a bank. That is the thing. He needs to maximize profits in order to ... not be in huge loss. Like, yeah, this is political project of his and it is both celebrated (by political side that gains by him owning it) and yelled about (by political side that is about to be pushed away from there) for political reasons. But, that does not mean he can have it as complete looser - if nothing for ego reasons. And his initial moves are moves of someone desperate to save some cash and panicking.

j0hnyl 4y ago

Twitter has over $5B in annual revenue, it will be fine.

phailhaus 4y ago
It only managed that in 2021, and still recorded a loss of $221M. In 2020 it made $3.7B, so the 2021 bump may have been pandemic-driven. [1] [1] https://www.businessofapps.com/data/twitter-statistics/ https://www.businessofapps.com/data/twitter-statistics/
- com2kid 4y ago
  Lay off 1000 employees and start cutting or renegotiating vendor contracts. 221M should be easy money to find for a company of Twitter's size. I say this as someone whose been a big tech co employee my entire life and who has seen how easily 10 or 20 million gets spent. I have also seen how easily a million gets thrown out here or there for vendors to do some data analysis work, or even worse, create shiny powerpoint slides to present to higher ups. Remove a layer of management, stop all the outsourced make-work, and you may end up halfway there to saving 200 million.
  - jsnell 4y ago
    Musk has saddled Twitter with a lot of debt as part of this deal. The interest on that debt is about $1 billion / year. So they don't need to just find $200M, they need to find $1.2B. Does it still sound easy?
    - com2kid 4y ago
      1.2B is a bit harder, yeah. I guess I should have stated that Twitter could have been profitable awhile back, and it was likely a choice they made to not be. Not sure why they made that choice, and it seems like everyone who does know why no longer works there. My overall point was that large corporations have a lot of waste in them, entire teams dedicated to making shiny dashboards for execs who only ever look at them once or twice a year, or, something I saw at Microsoft, hiring vendors to write software, and also hiring another vending firm to manage the first vending firm. (Because MS, despite being filled with program managers and software developers, wasn't set up at the time to do short term projects so the easiest solution to that organizational problem was to flush a few million extra down the tubes...)

s1artibartfast 4y ago

Price overpaid also has to consider Tesla stock loss as well as the general market. TSLA is down ~45%. Elon sold 15B of Tesla stock to finance the deal and presumably 11B of other assets.