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I'm guessing bankruptcy has always been the plan, but I never really understood why his financial backers would knowingly light a pile of money on fire. For op

I'm guessing bankruptcy has always been the plan, but I never really understood why his financial backers would knowingly light a pile of money on fire. For oppressive governments, it seems easier to monitor & block activity on one major social media platform, rather than quashing twitter and dealing with the dozens of platforms that rise from the ashes. Maybe it's a megalomaniac dictator thing, and I will never understand.

coldpie 4y ago
> I never really understood why his financial backers would knowingly light a pile of money on fire Think about FTX, cryptocurrencies, Juicero... it's becoming pretty overwhelmingly clear that having money is not in any way correlated to being able to spend it intelligently. It's time to start seriously thinking about wealth caps.
Sebb767 4y ago
> I'm guessing bankruptcy has always been the plan Why? What advantage would that bring to him? Honest question. With him overpaying for Twitter already (maybe not completely voluntary), bankruptcy looks like the fastest way to make the deal even worse.
- sprkwd 4y ago
  Won't have to pay a Billion Dollars a year in interest.
  - Sebb767 4y ago
    How so? Either those loans are attached to Twitter (as I think they are), in which case his investment going to zero is still the worst thing that can happen, or they are attached to his wealth directly, in which case he will need to pay either way.
- mywittyname 4y ago
  > Why? It doesn't take a financial wizard to realize that Twitter was insolvent from the day it was purchased. Saddling a company with an interest payment that's nearly double revenue is a clear indication to me that the time period from purchase-to-bankruptcy was going to be measured in months. So we can be pretty confident that everyone involved with this purchase was expecting Twitter to die quickly. You and I are on the same page. But the "why" is not "why would they make such a poor financial choice," since it's clear the answer to that is "to kill Twitter." The why is really, "why bother killing Twitter?" I get Musk's reasoning, but I don't understand what his co-investors get out of the deal. Authoritarian regimes benefit from having dissidents operate on a centralized platform, because it's easier to monitor. Killing twitter pushes these groups out to platforms that are going to be decentralized and impossible to block. It's weakening their grip, not reinforcing it. My best guess is that they assumed that Musk would stay on post bankruptcy and act as their pro-authoritarian sock puppet. But they didn't anticipate his complete ineptitude would drive users off the platform in such numbers.
- CaptainZapp 4y ago
  > maybe not completely voluntary Why would you say that? He signed a binding agreement to buy Twitter at an agreed upon price. Nobody forced him to sign that, ergo: he completely voluntarily signed a binding agreement on which he later wanted to renege.
  - Sebb767 4y ago
    By the time he signed the agreement, it was voluntary. By the time ge actually bought it, it looked a lot like he'd rather not. This is not to defend Musk in any way, it's just a statement of facts.
hef19898 4y ago
Depends on what securities Elon had to provide to get the loans. If it was Tesla stock, well, thej it might not be as bad as deal for his financial backers, especially the banks. It might be for him, so.
onlyrealcuzzo 4y ago
Bankruptcy would be really bad for Musk in this case - his creditors will get 10s of billions worth of Tesla shares as collateral.
- rootusrootus 4y ago
  I have no idea how this works. Did he pledge a particular number of shares, or was it a dollar amount? I.e. if he had to pay up, would it be based on the current value of TSLA, or the value at the time he put them up as collateral? It could get ugly indeed. Tesla's brand image is slipping, and everything points to that just getting worse. Between Elon as the face of the company, and their seeming inability to deliver a competitive product now that everyone else has started making EVs... well, I wouldn't buy any TSLA for sure. You buy a Tesla now for the supercharger network, everything else is a compromise. That's a shaky place to be.
  - onlyrealcuzzo 4y ago
    https://archive.ph/JhTuM https://archive.ph/JhTuM Musk put up $22.4B of his own money to buy Twitter, plus another $4B he already had invested. Maybe Twitter was worthless when Musk bought it, and that $26.4B was - theoretically - already burnt in the deal. If you pay $26.4B to buy garbage, you lost $26.4B from the start... Assuming Twitter is not worthless, Musk loses whatever percentage of that $26.4B actually has value. Worst case, that's probably at least 20% - which is still $5.28B. He'll also still be on the hook for $13B in personal debt financing to banks. Unless Musk himself can claim to be bankrupt, he owes them $13B - and they're going to get it one way or the other. Further, another $7B of equity investments came from questionable investors like Saudi Prince Alwaleed bin Talal. Who knows what they're going to do if Musk purposefully runs the company into the ground and burns billions of their money... There's a lot of reasons why Musk can't just say oops, claim bankruptcy and leave everyone else holding the bag. It's almost as if all the other investors aren't morons...
    - Eji1700 4y ago
      Yeah I really think the banks backed this deal with the intention of carving up Musk because of the way he financed this. I don’t know enough about the subject to be confident but I wouldn’t be shocked if he loses control of Tesla in the long run because of this
Nifty3929 4y ago
Musk's grand plan is to lose $30B or so of his own money, plus $13B from bankers who trusted that he would pay them back? That does not seem plausible to me.
- dragontamer 4y ago
  The $13 billion is now only worth $7 billion btw. The bond market has shifted. Twitter still owes $13 Billion of course, but those bonds are toxic. No one wants junk-bonds from Twitter right now.
- fallingfrog 4y ago
  Well, I would say that he didn't lose it so much as he spent it to destroy Twitter out of spite. In which case he must be getting value for his money, he certainly seems to be enjoying himself.
- mywittyname 4y ago
  And yet, Twitter was insolvent the day the deal went through. The company is going to be "restructuring" it's debt by June '23. Whether that's in bankruptcy court or through private deals with bond holders.
PeterisP 4y ago
The public data about the deal seems to indicate that backers wouldn't care as they have solid collateral from Musk personally in form of Tesla stock, so unless Tesla goes down as well, the Twitter deal will be profitable for them as all the losses are on Musk.
- iamdbtoo 4y ago
  $TSLA is down 60% YTD. I hope they got really good prices for that stock.
nagyf 4y ago
What if he (or his investors) just wanted all of Twitter's data? What happens to the company's data if it goes bankrupt?

coldpie 4y ago

> I never really understood why his financial backers would knowingly light a pile of money on fire Think about FTX, cryptocurrencies, Juicero... it's becoming pretty overwhelmingly clear that having money is not in any way correlated to being able to spend it intelligently. It's time to start seriously thinking about wealth caps.

Sebb767 4y ago

> I'm guessing bankruptcy has always been the plan Why? What advantage would that bring to him? Honest question. With him overpaying for Twitter already (maybe not completely voluntary), bankruptcy looks like the fastest way to make the deal even worse.

sprkwd 4y ago
Won't have to pay a Billion Dollars a year in interest.
- Sebb767 4y ago
  How so? Either those loans are attached to Twitter (as I think they are), in which case his investment going to zero is still the worst thing that can happen, or they are attached to his wealth directly, in which case he will need to pay either way.
mywittyname 4y ago
> Why? It doesn't take a financial wizard to realize that Twitter was insolvent from the day it was purchased. Saddling a company with an interest payment that's nearly double revenue is a clear indication to me that the time period from purchase-to-bankruptcy was going to be measured in months. So we can be pretty confident that everyone involved with this purchase was expecting Twitter to die quickly. You and I are on the same page. But the "why" is not "why would they make such a poor financial choice," since it's clear the answer to that is "to kill Twitter." The why is really, "why bother killing Twitter?" I get Musk's reasoning, but I don't understand what his co-investors get out of the deal. Authoritarian regimes benefit from having dissidents operate on a centralized platform, because it's easier to monitor. Killing twitter pushes these groups out to platforms that are going to be decentralized and impossible to block. It's weakening their grip, not reinforcing it. My best guess is that they assumed that Musk would stay on post bankruptcy and act as their pro-authoritarian sock puppet. But they didn't anticipate his complete ineptitude would drive users off the platform in such numbers.
CaptainZapp 4y ago
> maybe not completely voluntary Why would you say that? He signed a binding agreement to buy Twitter at an agreed upon price. Nobody forced him to sign that, ergo: he completely voluntarily signed a binding agreement on which he later wanted to renege.
- Sebb767 4y ago
  By the time he signed the agreement, it was voluntary. By the time ge actually bought it, it looked a lot like he'd rather not. This is not to defend Musk in any way, it's just a statement of facts.

hef19898 4y ago

Depends on what securities Elon had to provide to get the loans. If it was Tesla stock, well, thej it might not be as bad as deal for his financial backers, especially the banks. It might be for him, so.

onlyrealcuzzo 4y ago

Bankruptcy would be really bad for Musk in this case - his creditors will get 10s of billions worth of Tesla shares as collateral.

rootusrootus 4y ago
I have no idea how this works. Did he pledge a particular number of shares, or was it a dollar amount? I.e. if he had to pay up, would it be based on the current value of TSLA, or the value at the time he put them up as collateral? It could get ugly indeed. Tesla's brand image is slipping, and everything points to that just getting worse. Between Elon as the face of the company, and their seeming inability to deliver a competitive product now that everyone else has started making EVs... well, I wouldn't buy any TSLA for sure. You buy a Tesla now for the supercharger network, everything else is a compromise. That's a shaky place to be.
- onlyrealcuzzo 4y ago
  https://archive.ph/JhTuM https://archive.ph/JhTuM Musk put up $22.4B of his own money to buy Twitter, plus another $4B he already had invested. Maybe Twitter was worthless when Musk bought it, and that $26.4B was - theoretically - already burnt in the deal. If you pay $26.4B to buy garbage, you lost $26.4B from the start... Assuming Twitter is not worthless, Musk loses whatever percentage of that $26.4B actually has value. Worst case, that's probably at least 20% - which is still $5.28B. He'll also still be on the hook for $13B in personal debt financing to banks. Unless Musk himself can claim to be bankrupt, he owes them $13B - and they're going to get it one way or the other. Further, another $7B of equity investments came from questionable investors like Saudi Prince Alwaleed bin Talal. Who knows what they're going to do if Musk purposefully runs the company into the ground and burns billions of their money... There's a lot of reasons why Musk can't just say oops, claim bankruptcy and leave everyone else holding the bag. It's almost as if all the other investors aren't morons...
  - Eji1700 4y ago
    Yeah I really think the banks backed this deal with the intention of carving up Musk because of the way he financed this. I don’t know enough about the subject to be confident but I wouldn’t be shocked if he loses control of Tesla in the long run because of this

Nifty3929 4y ago

Musk's grand plan is to lose $30B or so of his own money, plus $13B from bankers who trusted that he would pay them back? That does not seem plausible to me.

dragontamer 4y ago
The $13 billion is now only worth $7 billion btw. The bond market has shifted. Twitter still owes $13 Billion of course, but those bonds are toxic. No one wants junk-bonds from Twitter right now.
fallingfrog 4y ago
Well, I would say that he didn't lose it so much as he spent it to destroy Twitter out of spite. In which case he must be getting value for his money, he certainly seems to be enjoying himself.
mywittyname 4y ago
And yet, Twitter was insolvent the day the deal went through. The company is going to be "restructuring" it's debt by June '23. Whether that's in bankruptcy court or through private deals with bond holders.

PeterisP 4y ago

The public data about the deal seems to indicate that backers wouldn't care as they have solid collateral from Musk personally in form of Tesla stock, so unless Tesla goes down as well, the Twitter deal will be profitable for them as all the losses are on Musk.

iamdbtoo 4y ago
$TSLA is down 60% YTD. I hope they got really good prices for that stock.

nagyf 4y ago

What if he (or his investors) just wanted all of Twitter's data? What happens to the company's data if it goes bankrupt?