4 ms·

Having 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

by a4isms 4y ago

Having 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 ago
What 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 ago
  Precisely. (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 ago
  That’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.
  - sidibe 4y ago
    > 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. Let me get ahead of you there. They would only pay for a quality product which Twitter is definitely not, as a ruiner of modern discourse. Of course there's also the catch that there are no quality products anymore. The whole world of products is devolving at almost the speed of Google Search. But definitely paying is the superior business model
    - deleted 4y ago
      [deleted]
- cma 4y ago
  The thinking in April was probably they can sell off a bunch of crypto tokens they create. Some of his texts reference this or using it to pump Doge.
- Ancapistani 4y ago
  I can't think of anything, but Twitter is responsible for a lot of major projects out there. Bootstrap comes to mind - and while that's not something I foresee them "selling", a company large enough to produce a F/OSS project of that size and complexity surely has any number of large, mature products that they could sell or monetize. Also, the key part of the LBO playbook isn't making quick cash from selling off assets - it's divesting the company of cost centers and investing heavily in profit centers. If you're able to sell the things that aren't making you money, all the better.
411111111111111 4y ago
I don't think he ever drank his own Kool-aid. He wasn't planning on actually actually finalizing the purchase, it was most likely just done so he could dump some overvalued Tesla stock. He did try to back out after he made these trades after all. The only reason he finally accepted the deal was because he was forced to by the court.
- deleted 4y ago
  [deleted]
- deleted 4y ago
  [deleted]
- mdasen 4y ago
  It seems like he could have accomplished that without signing an agreement to purchase Twitter - especially one that waived due diligence. 1) Tweet things like "I should buy Twitter", "I'm working on moving money around, finding investors, and freeing up money I have tied up to buy Twitter", "Hate selling Tesla, but we need a free speech platform. People will be getting bargains on TSLA!" 2) Sell the Tesla stock he wanted to sell. 3) Make an insulting offer for TWTR at a low value with all sorts of contingencies. He wasn't planning on finalizing the purchase? When you aren't planning on finalizing the purchase, you put in all sorts of contingencies. You don't waive everything. I'd say he tried to back out after the market started turning. It became clear that a lot of ad-based platforms were going to be facing some hard times ahead and interest rates started climbing. I mean, if he'd waited a few months to make his "I want to buy Twitter" play, he'd been able to have offered a ton less. I think Twitter's board of directors went from "we're going to fight Musk" to "Musk must buy us" because of how the market turned. Had Twitter's board "drunk the kool-aid" when they were fighting the buyout? I think it's in part a case of bad timing. In April, people were paying $130 for GOOG. A month later it was only $113 and now it's $85. META was $210 in April and now it's $89 (their story does have some complications around metaverse stuff). In November 2021, people were paying $54 for TWTR. In January when Musk started buying shares, Twitter was in the $30s. Without Musk's stated buyout offer, Twitter shares probably would have sank like Google or Meta's. Musk probably realized that he wasn't getting Twitter for cheap offering $54.20/share (below their 52-week high), but actually way overpaying given market conditions that were rapidly declining. Twitter's board of directors wanted to adopt a poison pill to prevent getting $54.20/share in a hostile takeover. I think it's hard to argue "it was just a ruse to dump Tesla stock". You don't waive due diligence if it's a ruse. Twitter's board wouldn't have been so hostile to it if they thought it was a great price. It's more just that the market conditions shifted a lot over the Spring, Summer, and Fall this year. If Musk had waited 6 months to make the offer, he probably could have bought Twitter for $15-20B instead of $44B.
dboreham 4y ago
"Everyone" ?
- deleted 4y ago
  [deleted]
mikewarot 4y ago
Serious question: Who is stupid enough to make these loans? How can they not see they won't get their money back? I suspect it is a tax thing/way to move money, isn't it?
- rufus_foreman 4y ago
  They just write it off.
- edgefield 4y ago
  I’m betting they collateralize the debt, selling all or a portion it off to reduce exposure.
- bagels 4y ago
  Well, they could have required Tesla or SpaceX as collateral.

by a4isms 4y ago

madeofpalk 4y ago

What 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 ago
Precisely. (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 ago
That’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.
- sidibe 4y ago
  > 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. Let me get ahead of you there. They would only pay for a quality product which Twitter is definitely not, as a ruiner of modern discourse. Of course there's also the catch that there are no quality products anymore. The whole world of products is devolving at almost the speed of Google Search. But definitely paying is the superior business model
  - deleted 4y ago
    [deleted]
cma 4y ago
The thinking in April was probably they can sell off a bunch of crypto tokens they create. Some of his texts reference this or using it to pump Doge.
Ancapistani 4y ago
I can't think of anything, but Twitter is responsible for a lot of major projects out there. Bootstrap comes to mind - and while that's not something I foresee them "selling", a company large enough to produce a F/OSS project of that size and complexity surely has any number of large, mature products that they could sell or monetize. Also, the key part of the LBO playbook isn't making quick cash from selling off assets - it's divesting the company of cost centers and investing heavily in profit centers. If you're able to sell the things that aren't making you money, all the better.

411111111111111 4y ago

I don't think he ever drank his own Kool-aid. He wasn't planning on actually actually finalizing the purchase, it was most likely just done so he could dump some overvalued Tesla stock. He did try to back out after he made these trades after all. The only reason he finally accepted the deal was because he was forced to by the court.

deleted 4y ago
[deleted]
deleted 4y ago
[deleted]
mdasen 4y ago
It seems like he could have accomplished that without signing an agreement to purchase Twitter - especially one that waived due diligence. 1) Tweet things like "I should buy Twitter", "I'm working on moving money around, finding investors, and freeing up money I have tied up to buy Twitter", "Hate selling Tesla, but we need a free speech platform. People will be getting bargains on TSLA!" 2) Sell the Tesla stock he wanted to sell. 3) Make an insulting offer for TWTR at a low value with all sorts of contingencies. He wasn't planning on finalizing the purchase? When you aren't planning on finalizing the purchase, you put in all sorts of contingencies. You don't waive everything. I'd say he tried to back out after the market started turning. It became clear that a lot of ad-based platforms were going to be facing some hard times ahead and interest rates started climbing. I mean, if he'd waited a few months to make his "I want to buy Twitter" play, he'd been able to have offered a ton less. I think Twitter's board of directors went from "we're going to fight Musk" to "Musk must buy us" because of how the market turned. Had Twitter's board "drunk the kool-aid" when they were fighting the buyout? I think it's in part a case of bad timing. In April, people were paying $130 for GOOG. A month later it was only $113 and now it's $85. META was $210 in April and now it's $89 (their story does have some complications around metaverse stuff). In November 2021, people were paying $54 for TWTR. In January when Musk started buying shares, Twitter was in the $30s. Without Musk's stated buyout offer, Twitter shares probably would have sank like Google or Meta's. Musk probably realized that he wasn't getting Twitter for cheap offering $54.20/share (below their 52-week high), but actually way overpaying given market conditions that were rapidly declining. Twitter's board of directors wanted to adopt a poison pill to prevent getting $54.20/share in a hostile takeover. I think it's hard to argue "it was just a ruse to dump Tesla stock". You don't waive due diligence if it's a ruse. Twitter's board wouldn't have been so hostile to it if they thought it was a great price. It's more just that the market conditions shifted a lot over the Spring, Summer, and Fall this year. If Musk had waited 6 months to make the offer, he probably could have bought Twitter for $15-20B instead of $44B.

dboreham 4y ago

"Everyone" ?

deleted 4y ago
[deleted]

mikewarot 4y ago

Serious question: Who is stupid enough to make these loans? How can they not see they won't get their money back? I suspect it is a tax thing/way to move money, isn't it?

rufus_foreman 4y ago
They just write it off.
edgefield 4y ago
I’m betting they collateralize the debt, selling all or a portion it off to reduce exposure.
bagels 4y ago
Well, they could have required Tesla or SpaceX as collateral.