14 ms·

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 too

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?
      - trowawee 4y ago
        You do not seem to know what you're talking about. The 12.7bn that was borrowed is going on Twitter's books. Their debt load prior to this leveraged buyout was 5.5bn; it's now 18.3bn[0], with yearly interest payments of roughly 1bn. [0]: https://www.barrons.com/articles/tesla-stock-twitter-debt-51667242672 https://www.barrons.com/articles/tesla-stock-twitter-debt-51...
        humanizersequel 4y ago
        >yearly interest payments of roughly 1bn This is on top of the principal? They pay 1bn every year and none of it counted against their debt?
        trowawee 4y ago
        Yes, that's just for the interest.
        hnfong 4y ago
        That's about right. 1bn/18.3bn = 5.4% "Risk free" treasury bond yields are ~4.x% 1% premium for the risk seems reasonable given that Twitter is not known for making profits. Presumably some of the debt were incurred before the rate hikes so it's kind of on the low side.
      - afavour 4y ago
        You may need to change your username. The debt is assumed by Twitter and it is liable for $1bn a year in interest payments: https://www.nytimes.com/2022/10/30/technology/elon-musk-twitter-debt.html https://www.nytimes.com/2022/10/30/technology/elon-musk-twit...
        credit_guy 4y ago
        Haha, I'll give that serious consideration. Now, I read that NY Times article, and I guess the crucial sentence that you are referring to is To do the deal, Mr. Musk, the world’s richest man, loaded about $13 billion in debt on the company, which had not turned a profit for eight of the past 10 years. Now, I'm not privy to the deal's details, but since you appear to be more informed, maybe you can clarify something for me. How could Musk load with debt a company that he did not own yet? Legally, how does this work? In the end someone has to sign a piece of paper. Can I sign a piece of paper making you owe some money to someone else? I can see how this could work. The then shareholders decided (indirectly via the board of directors) to borrow the cool $12.7 BN so Musk can use his own money and that debt to buy them all out at twice the fair market price. But then was it Musk who loaded Twitter with debt, or the outgoing directors?

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?
    - trowawee 4y ago
      You do not seem to know what you're talking about. The 12.7bn that was borrowed is going on Twitter's books. Their debt load prior to this leveraged buyout was 5.5bn; it's now 18.3bn[0], with yearly interest payments of roughly 1bn. [0]: https://www.barrons.com/articles/tesla-stock-twitter-debt-51667242672 https://www.barrons.com/articles/tesla-stock-twitter-debt-51...
      - humanizersequel 4y ago
        >yearly interest payments of roughly 1bn This is on top of the principal? They pay 1bn every year and none of it counted against their debt?
        trowawee 4y ago
        Yes, that's just for the interest.
        hnfong 4y ago
        That's about right. 1bn/18.3bn = 5.4% "Risk free" treasury bond yields are ~4.x% 1% premium for the risk seems reasonable given that Twitter is not known for making profits. Presumably some of the debt were incurred before the rate hikes so it's kind of on the low side.
    - afavour 4y ago
      You may need to change your username. The debt is assumed by Twitter and it is liable for $1bn a year in interest payments: https://www.nytimes.com/2022/10/30/technology/elon-musk-twitter-debt.html https://www.nytimes.com/2022/10/30/technology/elon-musk-twit...
      - credit_guy 4y ago
        Haha, I'll give that serious consideration. Now, I read that NY Times article, and I guess the crucial sentence that you are referring to is To do the deal, Mr. Musk, the world’s richest man, loaded about $13 billion in debt on the company, which had not turned a profit for eight of the past 10 years. Now, I'm not privy to the deal's details, but since you appear to be more informed, maybe you can clarify something for me. How could Musk load with debt a company that he did not own yet? Legally, how does this work? In the end someone has to sign a piece of paper. Can I sign a piece of paper making you owe some money to someone else? I can see how this could work. The then shareholders decided (indirectly via the board of directors) to borrow the cool $12.7 BN so Musk can use his own money and that debt to buy them all out at twice the fair market price. But then was it Musk who loaded Twitter with debt, or the outgoing directors?