5 ms·

$1bn, the exact amount of debt interest Twitter now has to pay off after Musk saddled it with so much debt. So much of this feels like such a waste. I don’t ha

$1bn, the exact amount of debt interest Twitter now has to pay off after Musk saddled it with so much debt. So much of this feels like such a waste. I don’t have any problem with the idea of someone taking Twitter private in order to fix it. But with this kind of debt financing and with a CEO that doesn’t seem to understand the company (and tried to get out of buying it)…

Aphataeros 4y ago
You've captured my sentiments exactly...
refurb 4y ago
Why a waste? Sounds like a smart move? Buy a company, drastically reduce unnecessary expenses.
- tfsh 4y ago
  All those unnecessary expenses like content moderation and robust fault tolerant infrastructure.
  - valine 4y ago
    Twitter going down occasionally wouldn’t be the worst thing in the world.
  - PubliusMI 4y ago
  - factsarelolz 4y ago
    Or gigantic offices in expensive down town areas, all the coworkering space rent, food served at said office buildings, and personnel.
    - listless 4y ago
      This was my thought. Or at least move HQ somewhere else. Although he’ll probably end up doing that anyway.
  - 8f2ab37a-ed6c 4y ago
    It's an app for billionaires and journos to crank out viral memes, not a pacemaker. The world will be ok.
    - afavour 4y ago
      Not really the point here. If you spent tens of billions purchasing Twitter you presumably don’t want the world to be without it. You have a very active interest in making it a success.
      - darthrupert 4y ago
        Unless you're so beyond caring and vindictive that you're willing to do that just to screw over the shareholders who forced you to buy the company.
        nyargh 4y ago
        Screwing them over how, exactly? As far as I can tell most of the shareholders got cashed out at a valuation way above market. I'd love to be similarly "screwed over" given the opportunity.
        afavour 4y ago
        Then that’s a sign Musk has absolutely lost it. Writing off tens of billions for petty revenge is insane. (also the shareholders just cashed out, they don’t care)
      - rad_gruchalski 4y ago
        From the buyer’s perspective the only result that matters is the profit.
  - knaekhoved 4y ago
    [flagged]
  - watwut 4y ago
    And team that communicates with advertisers for advertisers.
- nemothekid 4y ago
  >Buy a company, drastically reduce unnecessary expenses. This famously works out very well for PE firms. It seems very naive to assume Twitter was casually spending 1B/yr in "unnecessary expenses". Maybe the previous CEO/CTO was a baffling moron, but I tend to have more faith in people absent of evidence otherwise. I'm going to be surprised if Twitter is around in year - I'm just they have the capital to keep the lights on but it will be a very different story if advertisers start to abandon the platform because the adops infrastructure was gutted as an "unnecessary expense".
  - nothatscool 4y ago
    Weren’t they spending almost half a billion a year on r&d?
    - GoOnThenDoTell 4y ago
      That usually just means regular engineering staff
  - refurb 4y ago
    Twitter has expenses of $5B per year. https://finance.yahoo.com/quote/TWTR/financials/ https://finance.yahoo.com/quote/TWTR/financials/ So just view this as "A 20% reduction in expenses". Doesn't seem quite to scary huh?
- deleted 4y ago
  [deleted]
- EricDeb 4y ago
  would have been smart if you bought it for a good deal.
bagels 4y ago
Ignoring all the other things that are wrong with this whole situation... if they can make it $1B more efficient, how is it a waste even given the loans? Presumably the plan is to get rid of the debt eventually, and then you'll have a much more financially healthy company, assuming it can actually get $1B more efficient.
- dkjaudyeqooe 4y ago
  If they can, that's great, if not then they're setting up Twitter for bankruptcy, or asset sales, if they have any. Generally speaking, loading up a company with debt is corrosive to good management. If you have to cover your interest payments each month, and that's hard, it focuses the business on short term survival rather than investing in growth in the longer term.
  - bagels 4y ago
    Definitely, the debt is a burden. I don't see how it's a waste to save money though. Maybe the cuts are so dramatic it damages the business, but reducing wasted money is generally good management.
    - dkjaudyeqooe 4y ago
      It's like surgery: making cuts is part of the job, but the more drastic and indiscriminate the more likely the patient dies. Given that Musk has just arrived, how can these cuts be carefully considered? He burst through the door and started slashing from what anyone can tell. Even if Twitter is heavily bloated, the cuts may be fatal anyway on that basis.
    - GoOnThenDoTell 4y ago
      Cutting costs is good, quickly slashing 50% doesn’t seem carefully considered and may cause actual problems.
- afavour 4y ago
  Seems like a pretty massive “if” there. An extra one billion in efficiency without detriment to the service?
colechristensen 4y ago
Wait, what debt has Musk made Twitter take on? (being at the helm mere days, I really doubt there's any, debt like that takes longer to raise) Musk himself took on ~$12 billion to finance the deal, that debt isn't on Twitter's books.
- deleted 4y ago
  [deleted]
- hither_shores 4y ago
  It was a leveraged buyout
  - credit_guy 4y ago
    Ok, so what if it was a leveraged buyout? All buyouts are. How did Twitter get "saddled" with debt?
    - fakedang 4y ago
      No, all-cash buyouts are also a thing.
      - credit_guy 4y ago
        This was an all-cash buyout. It does not mean it was not leveraged. All-cash buyouts are those buyouts where the acquirer pays with cash and not their own stock. In this case, Musk used only cash. But some of that cash (about $12.7 BN) was borrowed from banks. So, it was leveraged. In principle some buyer like Musk could buy without any help from banks, but why would they do that? You don't get to be a multi-billionaire without getting familiar with financing. In any case, leveraged or not, Musk did not saddle Twitter with any debt. Maybe he will do it in the future, but for the time being he didn't, because he did not have time to do it. He could try to issue a huge amount of debt later, and pay himself an extremely fat dividend, so he can turn a quick profit. But in the current market environment, that does not seem even remotely likely. Who is going to buy newly issued Twitter bonds? At what yields? A one year US Treasury yields 4.8%, what type of yield would one require for a bond issued by Twitter? 10%? 15%? If investors get a hint that Musk is just trying to run Twitter into the ground and get himself a nice exit, they won't invest even at 30%. After the whole saga with Musk repeatedly changing his mind on the deal (and before that the $420-for-sure Tesla buyout), how many investors do you think would fall for a get-rich-quick scheme perpetrated by a guy who can't actually climb the richest man ladder anymore?

Aphataeros 4y ago

You've captured my sentiments exactly...

refurb 4y ago

Why a waste? Sounds like a smart move? Buy a company, drastically reduce unnecessary expenses.

tfsh 4y ago
All those unnecessary expenses like content moderation and robust fault tolerant infrastructure.
- valine 4y ago
  Twitter going down occasionally wouldn’t be the worst thing in the world.
- PubliusMI 4y ago
- factsarelolz 4y ago
  Or gigantic offices in expensive down town areas, all the coworkering space rent, food served at said office buildings, and personnel.
  - listless 4y ago
    This was my thought. Or at least move HQ somewhere else. Although he’ll probably end up doing that anyway.
- 8f2ab37a-ed6c 4y ago
  It's an app for billionaires and journos to crank out viral memes, not a pacemaker. The world will be ok.
  - afavour 4y ago
    Not really the point here. If you spent tens of billions purchasing Twitter you presumably don’t want the world to be without it. You have a very active interest in making it a success.
    - darthrupert 4y ago
      Unless you're so beyond caring and vindictive that you're willing to do that just to screw over the shareholders who forced you to buy the company.
      - nyargh 4y ago
        Screwing them over how, exactly? As far as I can tell most of the shareholders got cashed out at a valuation way above market. I'd love to be similarly "screwed over" given the opportunity.
      - afavour 4y ago
        Then that’s a sign Musk has absolutely lost it. Writing off tens of billions for petty revenge is insane. (also the shareholders just cashed out, they don’t care)
    - rad_gruchalski 4y ago
      From the buyer’s perspective the only result that matters is the profit.
- knaekhoved 4y ago
  [flagged]
- watwut 4y ago
  And team that communicates with advertisers for advertisers.
nemothekid 4y ago
>Buy a company, drastically reduce unnecessary expenses. This famously works out very well for PE firms. It seems very naive to assume Twitter was casually spending 1B/yr in "unnecessary expenses". Maybe the previous CEO/CTO was a baffling moron, but I tend to have more faith in people absent of evidence otherwise. I'm going to be surprised if Twitter is around in year - I'm just they have the capital to keep the lights on but it will be a very different story if advertisers start to abandon the platform because the adops infrastructure was gutted as an "unnecessary expense".
- nothatscool 4y ago
  Weren’t they spending almost half a billion a year on r&d?
  - GoOnThenDoTell 4y ago
    That usually just means regular engineering staff
- refurb 4y ago
  Twitter has expenses of $5B per year. https://finance.yahoo.com/quote/TWTR/financials/ https://finance.yahoo.com/quote/TWTR/financials/ So just view this as "A 20% reduction in expenses". Doesn't seem quite to scary huh?
deleted 4y ago
[deleted]
EricDeb 4y ago
would have been smart if you bought it for a good deal.

bagels 4y ago

Ignoring all the other things that are wrong with this whole situation... if they can make it $1B more efficient, how is it a waste even given the loans? Presumably the plan is to get rid of the debt eventually, and then you'll have a much more financially healthy company, assuming it can actually get $1B more efficient.

dkjaudyeqooe 4y ago
If they can, that's great, if not then they're setting up Twitter for bankruptcy, or asset sales, if they have any. Generally speaking, loading up a company with debt is corrosive to good management. If you have to cover your interest payments each month, and that's hard, it focuses the business on short term survival rather than investing in growth in the longer term.
- bagels 4y ago
  Definitely, the debt is a burden. I don't see how it's a waste to save money though. Maybe the cuts are so dramatic it damages the business, but reducing wasted money is generally good management.
  - dkjaudyeqooe 4y ago
    It's like surgery: making cuts is part of the job, but the more drastic and indiscriminate the more likely the patient dies. Given that Musk has just arrived, how can these cuts be carefully considered? He burst through the door and started slashing from what anyone can tell. Even if Twitter is heavily bloated, the cuts may be fatal anyway on that basis.
  - GoOnThenDoTell 4y ago
    Cutting costs is good, quickly slashing 50% doesn’t seem carefully considered and may cause actual problems.
afavour 4y ago
Seems like a pretty massive “if” there. An extra one billion in efficiency without detriment to the service?

colechristensen 4y ago

Wait, what debt has Musk made Twitter take on? (being at the helm mere days, I really doubt there's any, debt like that takes longer to raise) Musk himself took on ~$12 billion to finance the deal, that debt isn't on Twitter's books.

deleted 4y ago
[deleted]
hither_shores 4y ago
It was a leveraged buyout
- credit_guy 4y ago
  Ok, so what if it was a leveraged buyout? All buyouts are. How did Twitter get "saddled" with debt?
  - fakedang 4y ago
    No, all-cash buyouts are also a thing.
    - credit_guy 4y ago
      This was an all-cash buyout. It does not mean it was not leveraged. All-cash buyouts are those buyouts where the acquirer pays with cash and not their own stock. In this case, Musk used only cash. But some of that cash (about $12.7 BN) was borrowed from banks. So, it was leveraged. In principle some buyer like Musk could buy without any help from banks, but why would they do that? You don't get to be a multi-billionaire without getting familiar with financing. In any case, leveraged or not, Musk did not saddle Twitter with any debt. Maybe he will do it in the future, but for the time being he didn't, because he did not have time to do it. He could try to issue a huge amount of debt later, and pay himself an extremely fat dividend, so he can turn a quick profit. But in the current market environment, that does not seem even remotely likely. Who is going to buy newly issued Twitter bonds? At what yields? A one year US Treasury yields 4.8%, what type of yield would one require for a bond issued by Twitter? 10%? 15%? If investors get a hint that Musk is just trying to run Twitter into the ground and get himself a nice exit, they won't invest even at 30%. After the whole saga with Musk repeatedly changing his mind on the deal (and before that the $420-for-sure Tesla buyout), how many investors do you think would fall for a get-rich-quick scheme perpetrated by a guy who can't actually climb the richest man ladder anymore?