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The main difference isn't really who but how much money. One uses a lot of goods and services in ordinary life. Generally speaking one hopes that the provider o
by hristov 4y ago
The main difference isn't really who but how much money. One uses a lot of goods and services in ordinary life. Generally speaking one hopes that the provider of these goods and services uses their resources efficiently to provide them for a reasonable price including reasonable profit.
When a leveraged buyout happens (this is true for most leveraged buyouts) a large cost is put into the business that wasn't there before. And this cost does nothing to help make the good or service better. It merely exists so that person B may own the business instead of person A.
So what is the difference between Musk and the previous shareholders? The main difference is that Musk put an enormous cost on the business which will be borne by twitters users and advertisers, and that cost brings twitter nothing more than having musk as an owner.
By himself musk may be no better or worse than the previous shareholders. But just for him to rule over twitter is going to cost twitter a lot of money that will probably reduce the quality of the service.
This is true of most leveraged buyouts and whenever a leveraged buyout happens to a company you use, it is always a good idea to look for alternatives. The official response of the leveraged buyout industry is that the new management is just so much better that it is worth to saddle the company with all this debt and all these costs to just change the management. And the customer will benefit from the better management.
It is yet to be seen whether Musk is such a great manager that he can run a social media company so much better than everybody else to make it worth taking the enormous debt, and do that without having any experience running a social media company and while running two (oh wait - three ) other companies simultaneously.
But generally speaking this is not the case. It might have been the case during the beginning of the LBO industry when there was some truly entrenched bad management in some US companies but not anymore. It is possible to change management of a publicly traded company without doing an LBO, and nowadays stockholders tend to be good about holding their managers to high standards.
- Aeolun 4y agoI’m afraid I don’t understand how Twitter can end up with debt from Musk buying it. How does that even work? Twitter the company takes out a huge loan to pay the current shareholders a fortune (which is decided by those same shareholders, no conflict of interest there at all). But who the fuck would give them a loan like that (like you say, just to have Musk at the helm)?
- rustybolt 4y agoHow I understand the parent post: Twitter has cost Musk a lot of money. Musk will now have to get a lot of value from twitter, and that will probably be bad news for the user.
- bboygravity 4y agoBecause Musk is known to increase the value of companies by taking from users and giving back crappy products and services?! I find that train of thought very unconvincing.
- newsclues 4y agoJust because the new owners paid price X doesn’t mean the previous owners weren’t extracting profits that were based on the value X of the business. Basically it seems like some people are doing some mental gymnastics to justify disliking or boycotting Twitter because Elon bought it and doesn’t seem to be going along with the program.
- HereBeBeasties 4y agoIt has cost Musk a lot of money, but the critical point here is that it has also cost Twitter a lot of money: Because it is a leveraged buy out Twitter owns the $13bn debt that was raised to buy it out.
- andsoitis 4y ago> I’m afraid I don’t understand how Twitter can end up with debt from Musk buying it. How does that even work? This article explains: (a) how leveraged buyouts work, (b) how Musk's acquisition is different from a regular LBO, and (c) what debt Twitter now has due to the deal. https://www.washingtonpost.com/business/elon-musks-twitter-deal-is-different-than-most-lbos-heres-how/2022/10/06/1cee4b02-45be-11ed-be17-89cbe6b8c0a5_story.html https://www.washingtonpost.com/business/elon-musks-twitter-d...
- Aeolun 4y agoThanks! I’ll give it a read. Edit: I must say that even after I read it I have trouble understanding how any of that happens except through well connected people moving money around to their own benefit. The banks are on the hook, but it’s not really the banks because it’s not their money they are lending out.
- andsoitis 4y ago> So what is the difference between Musk and the previous shareholders? The main difference is that Musk put an enormous cost on the business which will be borne by twitters users and advertisers, and that cost brings twitter nothing more than having musk as an owner. > By himself musk may be no better or worse than the previous shareholders. But just for him to rule over twitter is going to cost twitter a lot of money that will probably reduce the quality of the service. It seems to me that his product-focused ownership (remember, he's a big user of Twitter) will either make it better or he will run it into the ground (due to naïvety and incompetence in this domain). Both seem like a win/win situation to me. I think he has very strong incentives to make Twitter better because it is his stage, both for marketing his companies but also to stay int he limelight (ego).
- deleted 4y ago[deleted]
- parkingrift 4y agoTwitter was losing $360 million per year before Musk. These layoffs were going to happen whether Musk bought the company, or not.
- acdha 4y agoSome layoffs, perhaps. There’s no reason to think they would be this large or haphazard, and without billions in new debt Twitter’s financial pressure would be far lower. Their most profitable years would have been cancelled out by the new debt Musk brought, and that was before he tanked their ad sales.
- simonw 4y agoThank you, this comment is spot on.