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Musk’s Twitter purchase was a leveraged buyout
Some people are giving Musk a pass for today’s layoffs because Twitter is unprofitable and needs to cut costs. But the real pressure for cost cutting and the layoffs is that Musk purchased Twitter via a leveraged buyout. He loaded the company with $10B of additional debt and now is facing annual $1B interest payments. The dramatic layoffs with no severance are thus the result of Musk’s decision to buy the company and the acquisition strategy of using a leveraged buyout.
- dragontamer 4y ago> $10B of additional debt $13 Billion actually. > and now is facing annual $1B interest payments Estimated to be 10% APY given where CCC Debt was in April. But the details are sketchy and I haven't been able to get a better estimate than that. I've heard rumors of 50% fixed + 50% adjustable, meaning some of that debt can be as high as 16% right now (today, CCC Debt is going for 16% APY). So we're looking at $1.3 Billion to $2 Billion in interest payments alone (let alone principal) by my estimate. I've been curious if anyone out there has been able to get a better estimate on Twitter's LBO debt. -------- In short, this buyout turned Twitter from a $200-million lost-per-year company into a $1500-million to $2200-million lost-per-year company (pending anyone's better estimate).
- _jal 4y ago3500*300000=1050000000 I have no idea what average salary was there, but it looks to me like the layoffs don't even cover that.
- jimiray 4y agoyou can't cut deep enough to cover $1B in interest paymets, maybe now people will figure out that Musk is the wealthiest man in the world by taking tax dollars as subsidies for all his businesses.
- aaomidi 4y agoWonder if he's going to use money from his other companies for interest payments for twitter, and then claim tax deductions for those companies because these were interest payments. FWIW I have no idea how finances work, just can imagine Elon getting into weird loopholes.
- encryptluks2 4y agoHe's proven that you can do pretty much anything if wealthy enough and face almost no consequences.
- mikkergp 4y agoI suspect this is only true if the wealthy people protecting you keep making money.
- boeingUH60 4y agoHe can only do that if he owned Tesla and SpaceX outright. But, Tesla is a publicly-traded company with tens of thousands of shareholders that’ll sue him into oblivion if he tries that. SpaceX is privately-held, but has raised billions of dollars from dozens of investors, so that won’t fly neither.
- parineum 4y agoGoing into a sector with lots of incentives is good business. It's not like he lobbied congress for those subsidies and they were tailored so that basically only he could qualify. Everyone had access to all of those subsidies, Musk was a nobody before Tesla and SpaceX. Why didn't Ford and Boeing, companies with a much better footing than Musk, simply move into those sectors (EVs and re-usable rockets, respectively) and mop up all those subsidies for themselves?
- aaomidi 4y agohttps://www.opensecrets.org/orgs/tesla-inc/lobbying?id=D000057516 https://www.opensecrets.org/orgs/tesla-inc/lobbying?id=D0000... Tesla did lobby, quite a bit. They've also been angry about the subsidies that require cars to be union made.
- parineum 4y agoThe Roadster was released in 2008. Barely any money was spent on lobbying until after the Model S was already released (2012), the Powerwall announced (2015) and the Model X was released (2015). That's also post-IPO (2010). Tesla was already a successful, innovative electric car company before it started lobbying like a regular car company. All of the risk that paid off (what makes a businessman a good businessman) was done in the early days when he invested 6.5 million that he turned into billions.
- danaris 4y agoYeah, and Musk only became the CEO in 2008. He didn't create the company, and he didn't create the Roadster.
- parineum 4y agoHe invested 6.5m of the 7.5m that was raised in funding. Without that investment, Tesla probably dies on the vine. He didn't "create" the Roadster but he did believe in the electric car and backed it up with a significant investment that allowed the people who were hired to create it to stay employed. He deserves credit for believing in the David and turning it into Goliath (of EVs), even if government subsidies helped. I support the government subsidizing clean energy, electric cars and cheaper access to space and I think it's hypocritical to turn around and shit on the companies that take advantage of those subsidies and do exactly the thing that they are meant to encourage.
- s1artibartfast 4y ago>you can't cut deep enough to cover $1B in interest paymets Why not, when twitter's operational costs are ~5.5 billion and you are reportedly laying off 50-75% of staff?
- watwut 4y agoYou need to do it in a way that does not make the remaining core hugely dysfunctional. And it would be miracle if Musk could. And trolling does not help either. The sink thing was trolling and between that and layouts, the remaining people will be dysfunctional for quite a long time.
- mdasen 4y agoJust for some context, Twitter has around $4.5B in revenue per year. Clearly, you can't cut all spending. It looks like the "cost of revenue" is around half that ($2B) and you probably can't cut that. Do you cut sales and marketing? Well, then your revenue probably ends up declining. Do you cut R&D? Well, eventually others are going to eat your lunch. You have $1.6B in R&D costs and $1.2B in sales and marketing and $700M in admin costs (like Human Resources). As you note, it's really hard to cut deep enough to cover $1B in interest payments without cutting stuff that ends up hurting your revenue. As Twitter cuts their R&D, they're leaving themselves open to missing out on the future. Should Twitter have continued to invest in Vine? Well, the benefit of hindsight says "yes" given TikTok's success. As much as everyone is making fun of Meta's metaverse plans, it's certainly possible it'll be important in the future. We really just don't know. I remember everyone saying the iPhone was a silly toy and people would want to keep their Blackberries and Windows Mobile devices with keyboards. We can literally see the future and say, "nah, that'll never happen." If Musk cuts engineering too much, does the service just become mediocre? As you say, it's hard to cut deep enough to come up with $1B.
- andrewstuart2 4y agoThere's little chance average salary even for engineers comes to 300k in cash. Even Senior Staff SWE is ~270k base per levels.fyi, and that's got to be a 1-3% position, and that's just engineering, which is probably not the majority of these layoffs.
- grogenaut 4y agoYou do need to take all the support costs for staff into account. Buildings, network capacity, hr staff, managers, software licenses, hardware, benefits, fica/etc. It's not unreasonable to assume 30% extra for every head than their salary. Also most of those folks on levels also get compensated with stock or equity, so it's more than base. Going private means that goes away and their comp also gets slashed. Is he going to take it back public, what beyond base does twitter offer as comp.
- mikeyouse 4y agoYeah as a reference - I do a lot of this type of planning for non-equity employees and our number is 37% right now (site costs + US payroll taxes & benefits + hardware + incidentals).
- andrewstuart2 4y agoThanks for the reference. I've heard numbers thrown out but never anything asserted as an actual researched number.
- mikeyouse 4y agoYeah the org I work with has an interesting setup where the employees are employed by the parent organization and then we have dozens of projects as legal entities but no staff on their books. So to calibrate the passthrough cost that we charge those projects, we do a big analysis every quarter of all of our expenses for tax, 401k matching, 'staff development', non-capital hardware purchases, health/dental/vision, life insurance, etc. etc. So it's a pretty robust number. For highly paid employees over ~$200k, it's probably more like 34% since a bunch of that stuff doesn't scale with salary, but lower employees are closer to 40% so the blended rate covers a "typical" company.
- jjeaff 4y agoThere is no way the average salary of all the employees cut would be $300k. I'd be surprised if the average was higher than $100k. At least one source I found says the average salary of Twitter employees is $97k. (US only total compensation is closer to $300k with an average of $270k. But a lot of that is probably stock options which now must be paid in cash). So I would imagine the total savings are closer to $250m compared to when Twitter was public but maybe a lot more in savings vs what Twitter would have bled considering the stock options portion of the compensation would have had to have been cash.
- Ancapistani 4y agoYeah, total comp is the number the business cares about in this situation. Salary is only a part of that. > a lot of that is probably stock options which now must be paid in cash I won't say that's not a big deal, but it's a one-time cost. Paying $500k today to save $300k / year is an excellent move for Twitter - assuming, of course, that Musk is correct in his estimation that the employees cut were not contributing to the company's revenue.
- GoldenStake 4y agoLevel.fyi suggests much higher than 97k https://www.levels.fyi/companies/twitter/salaries https://www.levels.fyi/companies/twitter/salaries Although level.fyi is probably biased to high earners who post their salaries and has less data for non-engineers.
- jjeaff 4y agoMy guess is that the majority of employees at Twitter are not in fact engineers.
- svdr 4y agoI don't know much about finance, but why didn't he just pay the 13B? This seems much more expensive.
- klooney 4y agoHe doesn't want to sell all that stock, which would lose him control, and probably move the market around and be even more costly in terms of shares than what it looks like on paper.
- bpodgursky 4y agoPresumably because he thinks he will make more than 10% y/y from his Tesla and SpaceX stock.
- edf13 4y agoMore expensive for Twitter - the company, rather than Musk and his palls.
- karmicthreat 4y agoBecause then he doesn't have to sell his assets to pay for it.
- bcrescimanno 4y agoHe's not personally liable for the $13B. If (when?) Twitter implodes, he gets to walk away not owing a dime of that money--so why spend it if he doesn't have to?
- romankolpak 4y agothis is insanity
- deleted 4y ago[deleted]
- galdosdi 4y agoThe adjustable debt rumors should also be viewed in the context of an economy where everyone believes the fed will likely keep raising rates repeatedly and often over the next year or so. Definitely a risky situation
- a4isms 4y agoHaving been adjacent to the world of finance during the height of the Drexel/Milken/KKR leveraged-buyout craze of the 80s, I seem to remember that what ushered in the end of the excesses was a series of major failures where companies were taken private and saddled with huge debts, but attempts to sell off the parts and retain a profitable core that could then be taken public again or sold for a huge windfall began to fail. This buyout may be headed in the same direction, and if it is, I conjecture it will have serious negative repercussions for Musk personally and his other companies. Everyone insists he's playing 5D chess with his moves, but a lot of his success depends upon the strength of his "reality distortion field." In a very real way, he is successful because people think he's successful. A small failure here and a merger with another company there are merely blips. But a major failure that can be reasonably attributed to his "drinking his own kool-aid"[1] will undermine his ability to move markets or sell products on the sheer strength of Musk being Musk. [1]: Yes I am aware of the origin of the phrase.
- madeofpalk 4y agoWhat are the parts of Twitter that can be sold off, while retaining a profitable core? They've already shut down (Periscope, Vine) or sold off everything else apart from the core bird app
- a4isms 4y agoPrecisely. (I did not actually mean to suggest that Musk needed to follow the original LBO strategies, I was just saying that the end of the 80s LBO frenzy happened when those strategies begun to fail with massive LBOs. It's 35 years later. Musk will invent new strategies to win or fail.)
- toomuchtodo 4y agoThat’s one of the LBO playbooks, but it’s not the only method. In this case, Musk believes he can trim the fat and make Twitter profitable. But if advertisers flee and he thinks he can rely on verified payments alone, everyone on HN who signals interest for a social network they pay for will get to see how viable such a business model truly is. CircleCI is a recent example of this PE play.
- wnevets 4y ago> In short, this buyout turned Twitter from a $200-million lost-per-year company into a $1500-million to $2200-million lost-per-year company (pending anyone's better estimate). I wish I was this good at business.
- ben_w 4y agoI vaguely remember a quote, something like: "Making a small fortune is easy. You just have to start with a large fortune and then go into business."
- moralestapia 4y agoIt was Branson's (maybe?), "If you want to be a millionaire, start with a billion dollars and launch a new airline."
- deleted 4y ago[deleted]
- mritchie712 4y agoyes, but twitter now owns twitter. You need to pay money to buy a company usually.
- holdenk 4y agoThis matches the "cut infra cost by 1` billion" demand he made as well - https://www.reuters.com/technology/musk-orders-twitter-cut-infrastructure-costs-by-1-bln-sources-2022-11-03/ https://www.reuters.com/technology/musk-orders-twitter-cut-i...
- jjeaff 4y agoI don't think employee salaries would be included in infra costs. Except maybe the employees that work directly on maintaining the infrastructure.
- bink 4y agoI'm not sure why anyone would stick around to assist with this cost cutting only to be told "thanks for all the hard work, you're fired".
- type-r 4y agoyou've got 90 days of paid time off to look forward to
- croes 4y agoSo we will see more Twitter downtimes. Doesn't sound like a good idea.
- deleted 4y ago[deleted]
- toast0 4y agoLeveraged buyouts tend to be a great way to turn a struggling company into a payout for the current ownership and a dead company in 5-10 years. Usually there's not such huge cost cutting in the days after closing though.
- fallingfrog 4y agoIt doesn't usually happen that fast, but that's pretty normal too, isn't it? Typically the buyer cuts the quality of the business down to the bone and stops all investment in the future of the business and tries to extract as much profit as they can from the brand name recognition and existing infrastructure before the company goes bankrupt. Then they sell off the remaining assets for scrap. It's like a controlled demolition. If Elon follows this model, all updates to the site will stop and the amount of advertising and other forms of money extraction from users will skyrocket, and then as the site bleeds out users he'll eventually sell the IP and any other assets before having the firm declare bankruptcy so that he doesn't have to pay back the loans.
- toast0 4y agoYeah, the speed is surprising, usually you get 6 months to 2 years of close to business as usual before the cost cutting starts.
- jesuscript 4y agoEver heard of vulture capitalism? He kind of did this like private equity.
- gunapologist99 4y agoPlease add "Tell HN:" to your title.
- m348e912 4y agoI am actually curious how Musk is going to pull this off. Twitter is actually in a way worse financial situation than it was two weeks ago due to the massive amount of debt incurred in the buyout process (and the associated payments). Layoffs are a must and cutting infrastructure costs is also crucial, however it's critical that twitter starts generating some serious revenue. Some advertisers have paused buying, and the $8 blue check thing could help a little but there is major ground to make up and I don't know how it get's done in the short term. I'll be getting some popcorn, but I am rooting for Musk to figure this one out.
- jerf 4y agoTwitter's revenue in 2021 was $5 billion [1], with a claimed 217 active user count. That's $25/user/year. $8/month -> $96/year, so each new subscriber is immediately worth about four subscribers under the old plan, plus that plan doesn't cancel all ads. If they can cut costs and give people reasons to subscribe, it might work, but if I were the investor being pitched I would certainly have very pointy questions about their conversion rate. Personally I'd amp it to a straight $9.99 and cut all the ads for a subscriber, and the primary focus of my engineering over the next year would be trying to figure out how to incentivize subscriptions, preferably with new useful things not locking away too many existing features behind walls. Still, I'd love to see one of these social networks succeed on a model where their users pay them money, instead of their subscribers. The incentives are just too perverse when the money comes from ads. [1]: https://www.prnewswire.com/news-releases/twitter-announces-fourth-quarter-and-fiscal-year-2021-results-301479494.html https://www.prnewswire.com/news-releases/twitter-announces-f...
- Ancapistani 4y ago> so each new subscriber is immediately worth about four subscribers under the old plan To think about it another way: if 25% of active Twitter users subscribe to the plan at $8/mo, they'll double their revenue. My gut says that that's way optimistic, and a more reasonable expectation is 5-10% conversion. Even if you assume 5% conversion, that's a 20% increase in revenue coupled with a ~50% reduction in labor costs.
- hristov 4y agoGood point. Also whenever Musk talks about making sacrifices to “make ends meet”, one should point out that Twitter was a perfectly profitable company with all those employees before the buyout.
- wlesieutre 4y agoMaybe, but if we're headed into a recession you can expect large cuts to advertising budgets
- kgwgk 4y agoFor some values of "perfectly profitable": Year Net profit / loss ($mm) 2012 -79 2013 -645 2014 -577 2015 -521 2016 -456 2017 -108 2018 1206 2019 1466 2020 -1136 2021 -221
- vjeux 4y agoIf you sum all of this, that's -1071 for those like me that were curious.
- koonsolo 4y agoI get it that this is about profit. But to be fair, you have to factor in the valuation of the company to see if something was gained or lost in all those years.
- koonsolo 4y agoDid I say something stupid because of the downvotes? If a company chooses to reinvest the profit into the company, and therefore increases the valuation, it can be a gain, right? In that case no profit is made. If you have $1 loss and gain $3 valuation, that's a gain of $2, right?
- s1artibartfast 4y agoFrom an owner/investor perspective, you are correct. From the perspective of the corporate entity, you don't count valuation as profit/loss. For example, Twitter didn't make 44B revenue this year on the sale and you won't see it on their budget. Stock holders made that money. Same will be true again if Elon sells it for a profit or loss.
- bmitc 4y agoAgreed. And his response to Stephen King about “we gotta pay the bills somehow” is best read as “I gotta pay off this moronic purchase I made”. It’s really bothersome that people like Musk and Trump are able to so consistently and effectively over market their successes while turning around their complete failures to be successes in the mind’s eye of their followers. Musk is a walking contradiction of his yesterday’s self.
- bendbro 4y agoThis "great man" fallacy is EXACTLY what lead to the problems of the 1930s. I see a need for regulation. We are allowing young, impressionable men to fall down an illiberal pipeline and it needs to stop.
- jimiray 4y agoyou don't have to go that far back, Enron
- mardifoufs 4y agoWhat would you regulate? I'm not sure what exactly can be regulated here
- bendbro 4y agoThis is whataboutism. Identifying what I would regulate is not necessary to fix this problem, much like answering who would provide for a positive right is not necessary in the wealthiest society in all of history. I'll leave it to the scientists and experts. We'll figure it out.
- remarkEon 4y ago>[t]he dramatic layoffs with no severance They don't appear to be without severance[1]. >Today is your last working day at the company, however, you will remain employed by Twitter and will receive compensation and benefits through your separation date of February 2, 2023. >Within a week, you will receive details of your severance offer, financial resources extending beyond your Non-Working Notice period. [1] https://www.businessinsider.com/read-blunt-email-telling-twitter-staff-jobs-axed-layoffs-2022-11 https://www.businessinsider.com/read-blunt-email-telling-twi...
- celerity 4y agoFrom the article here it looks like people will stay on payroll until early 2023. They won't work but have to abide by Twitter's internal agreements. Does anyone know if part of these agreements includes not seeking other employment (a typical clause these days)?
- mirashii 4y agoThat’s not a typical clause and specifically illegal in California. A more common clause in California employment contracts for salaried employees limits outside employment to work that does not interfere with one’s job responsibilities, based on the idea that as a salaried employee that job should be your primary job
- Ancapistani 4y agoThanks for posting this - I was curious about the severance package. I'd consider three months' pay borderline "generous". I see two weeks' as the baseline, and anything over six weeks as "good". My understanding of the WARN Act is that it requires 60 days "notice". It sounds like Twitter is giving 90 days notice along 90 days of mandatory PTO, effective immediately. Having been laid off relatively recently (~2 years ago) and actively involved in hiring today, I expect that's not going to be long enough to seamlessly move to a new position, but it should be enough time and money to cut things back and weather the transition without dipping into savings - assuming you have savings, of course.
- marcinzm 4y agoThat explains why all he talks about is how to squeeze the most short term revenue out versus long term growth.
- dnissley 4y ago> But the real pressure for cost cutting and the layoffs is that Musk purchased Twitter via a leveraged buyout You think that if he paid completely up front he wouldn't care about cutting costs? Why? The pressure would still be there -- it would just be in the form of pressure to recoup his investment
- strangattractor 4y agoWhat does a lender do when you can't pay a mortgage? They come and repossess your house. That is the situation he is in now. He realized that at the last minute when he tried to bail but gosh darn those pesky laws and contracts:)
- a4isms 4y agoI can't speak for why someone else thinks this, and I certainly cannot read his mind, so this is just a general comment about buying something with cash or equity versus debt. If you buy with debt, you have to pay every month (or year, or whatever). So obviously you have to either have deep pockets to pay out of pocket, or generate more cash flow, and you have to do it NOW, because the debt must be serviced now. If you buy with cash and/or equity, you take on an opportunity cost, but you can afford to make longer-term investments, and you can afford to take your time with cost-cutting or other measures. The pressure to recoup your investment is certainly there, but the urgency to generate cash-flow in the short term is not. --- All that being said, if Musk doesn't think Twitter investing in initiatives that will take a while to pay off, but he does think it needs short-term moves like firing everyone in sight and putting Trump back on the platform and getting rid of pesky "activists" who think "freedom of speech" includes telling advertisers that they face boycotts... Well then, debt is clearly the winning move.
- kgwgk 4y ago> The pressure to recoup your investment is certainly there, but the urgency to generate cash-flow in the short term is not. In addition to having to pay the interests on the debt usually you also need to keep some financial metrics within some predefined thresholds - facing penalties in case of breach.
- strangattractor 4y agoIt's Captain Picard "Make it so" leadership at Twitter from now on.
- throwawaysleep 4y agoNearly always after suggestions from his officers. Not a casual edict from on high.
- imbusy111 4y agoWho is giving out these massive, high-risk loans?
- laweijfmvo 4y agoBanks that got free money from the Fed and can longer get massive returns in the stock market?
- danielmarkbruce 4y agoThey have to pay back any loans. They aren't free.
- danielmarkbruce 4y agoBanks have been doing LBO financing for decades at this point. They get paid for the risk, and mostly know what they are doing.
- 93po 4y agoHow did you calculate the level of risk for this loan?
- rad88 4y ago$1B+ interest payments but no market for the debt. It is as of now a massive high-risk loan (though perhaps it wasn't in April).
- beeboop 4y agoIs an interest payment on a load only reflecting the risk of it and nothing else? What's the balance between the risk and other factors? What do rates usually look like on loans used for this purpose? What is risky about the situation at hand from the lender's perspective? What is the scenario in which the lender isn't made whole?
- _Algernon_ 4y agoSeems like a big win for the general public: a company responsible for a toxic cesspool goes under while one of the most obnoxious billionaires gets their ego checked. Sucks for the employees that are collateral damage though.
- jimiray 4y agoThis is such a great way to look at this. I'm sad that the employees will lose their jobs but the fact that so much money is being invested in this and going to Mars but we can't stop kids from being killed during school, feed kids lunch if they are starving, or make any real impact on climate change should awaken us to the fact that we've been increasingly played since the 60's.
- nightski 4y agoThe employees are not innocent. If you do such a bad job that you attract the ire of a huge portion of users and a billionaire willing risk it big to buy out the company to correct the ship then maybe it is time for some self reflection.
- ribosometronome 4y agoThe people responsible for company direction decisions like that are the ones who will be profiting most from this, though. They're the C-Suites who were likely to have the most stock, have severance packages (which they'll certainly sue for and get).
- deleted 4y ago[deleted]
- sangnoir 4y agoThis is warmed over Calvinism "salvation through work" as applied to tech, but with the wrath of God replaced by billionaires. "If bad things happen to you, it's because you're bad person. Billionaires wouldn't visit their anger on good people"
- politician 4y agoI'll just remind everyone that Twitter's management team sued Elon to make this happen. They had full knowledge of the details of the offer and its financing.
- mjmsmith 4y agoDid they have any choice, given the massive payday it represented for shareholders?
- danielmarkbruce 4y agoOf course they didn't have a choice. It was the board, not management, and they had a fiduciary obligation to sue. They'd have been sued had they not, and they morally have an obligation to represent shareholders so they'd be awful people if they didn't.
- bink 4y ago"fiduciary obligation" (fiduciary duty) doesn't mean that if someone offers you above current value for your company that you are compelled to sell.
- kgwgk 4y agoThe shareholders voted.
- danielmarkbruce 4y agoNobody suggested they did. They have an obligation to act in shareholder's best interest. In this case, they'd have a very difficult time explaining that not suing would be in shareholder's best interest.
- thefreeman 4y agoThey would have definitely been sued by shareholders if they didn’t.
- 4y ago
- karmicthreat 4y agoLooks like Twitter will get sold off at a huge loss in a couple years. Is there anything like old twitter out there? Twitter with an open API during the Arab Spring was kind of an amazing time. I guess really it's all about TikTok at this point for that sort of thing.
- bogwog 4y agoHow about Mastodon/Pleroma?
- Waterluvian 4y agoNot that they can't become an option, but they fail my sniff test: zero of my non-technical friends in a group chat have ever heard of either of those.
- danaris 4y agoUnfortunately, in an ecosystem dominated by absolutely massive monopoly players, that's just going to be the case for nearly everything. What's the alternative to Facebook? ....uhhhh, I dunno, is MySpace still around? What's the alternative to Instagram? ....maybe TikTok? but that's just for videos What's the alternative to TikTok? ....YouTube, I guess? And round and round it goes. Yes; most people will only have heard of the big behemoth players in the social media field. Triply so for non-technical people. What that means is we who are technical need to start exploring alternatives and spreading the word about them. Not that we just need to shrug and accept that we will be playing in monopolists' sandboxes for the rest of our lives.
- JustSomeNobody 4y agoNope. I thought, let me try out Mastodon. I pull it up and try to create an account. The "official" instance isn't taking any new accounts. What? Okay, now what? Oh, I have to find an instance that is. Let me see. Good grief, look at that list. Okay, pick one at random. Nope not taking new accounts. Again. Again. Okay, found one. But they don't federate. Looks up federate. Wait, so it doesn't talk to the official instance. Okay, fuck this.
- mrits 4y agoI think OP needs to provide some evidence for the no severance accusation.
- 93po 4y agoThere isn't any. There's plain as day facts that there is severance happening.
- jrm4 4y agoCan we finally lay to rest the utter myth of "Elon Musk is a genius?" Thanks.
- shaburn 4y agoWow. The greatest LBO player of all time Carl Icahn said he would have done the Twitter Acquisition but did not want to have to compete with Musk, who was the obvious best man for the job.
- 93po 4y agoTell us about your corporate acquisition experience and how you bring better insight into this process than Elon. What is your perspective on how Elon did this poorly to the extent that you would declare him an idiot?
- jrm4 4y agoWho said "idiot?" I said "not a genius." There are gradations in-between.
- whamlastxmas 4y agoThe question still stands on what your advice to Elon would be to do it better. I assume you have some if you have an opinion on why he wasn't making moves you'd describe as smart.
- jrm4 4y agoLiterally doing nothing would be smarter than the moves he's doing now. He's hemorraging devs, violating employment law and watching the stock price of his other stuff tank. And that's just things that I can 100% confirm as true. If we get into the rumor mill of him banning people and such. Sigh.
- beeboop 4y agoDoing nothing would literally bankrupt Twitter. It's massively unprofitable.
- bdekoz 4y agoAutomattic will buy it in < 5 years with a Tumblr-sized discount
- jmyeet 4y ago> Musk’s decision to buy the company A more accurate version might be "Musk's inability to get out of a bad decision to buy the company". None of this surprises me. For all of Elon's recent bravado about "free speech", he is a capitalist first and foremost. When it became clear he couldn't get out of it, I predicted he'd just follow the private equity playbook: cut costs, fold or sell-off non-core assets, saddle the company with complicated debt and then sell it off while claiming victory. He'll probably retain all the power with a Silicon Valley share structure. None of this is surprising.
- watwut 4y agoMusks free speech bravado is limited to speech he likes or don't mind. It systematically ends when he does not kike the speech.
- Patrol8394 4y agoIt is mind blowing how such unprofitable companies got away for so many years. VC and startup incubators nowadays only want to hear about profitability, but they have poured $$$$ into unprofitable businesses for the last decade ad so. And created billionaires out of thing air. I hope we cam go back to a more sane financial/investing world.
- strangattractor 4y agoMIGA - Make Investing Great Again
- tlongo 4y agoAn absolutely non-finance-guy here. Why does Twitter owe money to the banks, that was used to actually buy Twitter? Anyone here who can explain this to me? I would love to know the magic behind this. The next thing I will do is going to the Porsche dealer, finance a car and happily watch the monthly rate beeing paid from the dealer's account.
- clairity 4y agoone simplified way to visualize this: create a corporate entity with the debt raised from investors (typically investment banks)--this entity will have a bunch of cash, the debt it owes for that cash, and no assets--and have that entity buy the target company. the cash gets sent to the old equity owners to relinquish their claim on the target company but the debt (and assets) stays with the merged company.
- hutzlibu 4y agoBecause Twitter was bought by X Holdings. Which lend the money and is now in debt, but also owns Twitter. And Musk owns X Holdings.
- joshe 4y agoYou can, you can go to a bank and ask for a loan for an ice cream truck to start a business. It will help a lot if you already have money and just want to finance it. They'll give the loan to a new company you create and that company will be responsible for paying it back. A buyout is just an extension of that.
- LightG 4y agoIsn't it basically Musk borrowing money in Twitter's name to finance part of the deal? Increases risk and exposure for the company, but not Musk personally.
- csours 4y agoBuy a Porsche, rent it out on one of the luxury car rental apps, pay the monthly note with profit from the rentals. Form a company, get a big loan, buy a bunch of luxury cars ... profit?? After you buy it, you don't just get to use it the way you want to all the time.
- clairity 4y agoof course it was a leveraged buyout. no single person has $44 billion burning a hole in their pocket, especially not musk, who has most of his net worth tied up in the equity of his various ventures. and that equity is too valuable to trade for a mediocre company like twitter, so it must have been debt, and you don't raise that much debt from the local credit union. musk has access to debt and is experienced enough to know how to employ that access to limit his (and his investors') risk exposure. this is literally finance 101. with that said, should financial systems be tilted this way to favor the wealthy and their capital? no, probably not. while musk is an outlier, in general there's a weak correlation between successes if you take out this skewed access to capital. instead of a few hundred billionaires, we could have hundreds of thousands more of entrepreneurs founding and leading useful companies.
- homarp 4y agohttps://www.ft.com/content/d1879d0c-c52e-4f48-82f0-09458add4aee https://www.ft.com/content/d1879d0c-c52e-4f48-82f0-09458add4... (or https://archive.ph/phHTi https://archive.ph/phHTi) " Banks that lent $12.7bn to Elon Musk for his $44bn Twitter takeover are preparing to hold the debt until early next year as they wait for the billionaire to unveil a clearer business plan they can market to investors, according to three people with knowledge of the plans. Barring an unexpected rally in credit markets this year, the group of lenders, led by Morgan Stanley, Bank of America and Barclays, have conceded they will be stuck holding the debt on their books for months or even longer and will probably end up incurring huge losses on the financing package. "
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- pearjuice 4y agoWhat's a scenario in which Musk will at least recoup his acquisition cost? Even if 10% of Twitter users (and that's a lot) will get on the 8$ plan, revenue is only roughly (100*20M?) 2B$ per year. As I make that napkin calculation I cannot imagine actually 20M people being active enough on Twitter to justify paying 100$ per year for it. Especially if the price won't be catered to regional purchasing power.
- sidcool 4y agoTotally agree with you. Much made an unsolicited bravado bid, but it bit back. But having said that, I think if anyone can turn this around financially it's Musk. Hell put everyone through hell though.
- daniel-cussen 4y ago
- joshmarlow 4y agoAs someone relatively new to finance, I have a newbie question - how do you know these details? I assume the leveraged buyout made some noise (how else did Musk get the funding?). Is this public information in some SEC filing somewhere or is this an inside scope/from some journalistic investigation?