4 ms·

An alternative is that it gets purchased for a few billion dollars by a tech PE firm or Microsoft, which honestly would be a pretty good outcome.

paxys 4y ago
A low single digit billion exit is meaningless for Elon. It things reach that point it'll make more sense for him to just ride it out till the end and file for bankruptcy.
dragontamer 4y ago
Even if you bought Twitter for $0, you're taking on $13 Billion in loans. You'd have to buy Twitter for *negative* dollars, like -$8 Billion (ie: Elon gives $8 Billion to you and Twitter) to "only" buy the company for $5 Billion effective costs. Note: The $13 Billion loan is likely devalued 30%+, so maybe its only worth $9.5 Billion these days. Hard to say exactly, I'm just making some crude assumptions here. The loans may have been backed by several banks, but they aren't trading on the public market yet so its hard to value them.
dragonwriter 4y ago
> An alternative is that it gets purchased for a few billion dollars by a tech PE firm or Microsoft, which honestly would be a pretty good outcome. But with all the potential outstanding liability? Why not wait until the hammer comes down and the uncertainty is gone to purchase the firm, or whatever assets are useful, unless you really want to beat someone else to the punch?
- dragontamer 4y ago
  I know you know this, but I'm going to elaborate for others. Bankruptcy is the best time to buy companies. The loans will be rewritten, so you can buy the company's assets _WITHOUT_ taking on any of its liabilities. The Twitter name, trademark, and other assets (maybe source code, servers, data-centers, etc. etc.) all will be up for sale. You can likely buy the "bits of Twitter" you care most about, and leave the other bits for others. I have severe doubts that anyone will want to buy Twitter when it has so much debt under its name. Might as well wait for it to collapse first.
  - ericbarrett 4y ago
    Twitter is also under fairly severe consent decrees from both the U.S. and EU. I wonder how those would work if you bought e.g. the trademark?
  - jamestimmins 4y ago
    I actually didn't know this, thanks for the info. Would it have to stop operating if it went bankrupt?
    - owenmarshall 4y ago
      It depends. Under US bankruptcy laws corporations can file for bankruptcy for the purpose of reorganization of debts (chapter 11) or for liquidation (chapter 7). Under reorganization the expectation is that you are trying to rehabilitate a failing business that may be profitable again - so the business continues running, and can even borrow money - though your business actions are monitored and ultimately may be approved by the court. Under liquidation, you auction off everything that isn’t bolted down (and some things that are). You usually restructure businesses that could emerge from bankruptcy and be profitable again, and liquidate those that can’t. Which one Twitter may be can be debated.
      - jamestimmins 4y ago
        So in this case, would Elon have to file for bankruptcy and then sell it to someone else to restructure it? If so, what happens with the cash, since I assume the debt-holders have been wiped out?
        owenmarshall 4y ago
        To restructure he wouldn’t necessarily need to sell: basically, Twitter would put out a restructuring plan that shows how they’re going to fairly pay creditors and bring the business back to profitability. Sometimes that means reducing operations and selling off parts of your business. It often means creditors taking a haircut - because 25% or 50% beats 0%. This often comes in equity in the restructured company in exchange for creditors waiving their claims. Here’s the rub, though: in chapter 11, the courts have a huge role. They approve your restructuring plan only if it’s fair to your creditors. They have to green light quite a few actions you might want to take in the course of running your business. They might form a creditors committee out of the people you owe money to and take their advice on decisions. It’s a long and drawn out process that requires calm leadership willing to work with ones “adversaries” to come to an agreement. And no matter your opinion on Elon, positive or negative, I doubt many people would say his reign at Twitter suggests he’d do that.
dmonitor 4y ago
That’s exactly what the world needs. More tech consolidation under Microsoft.

paxys 4y ago

A low single digit billion exit is meaningless for Elon. It things reach that point it'll make more sense for him to just ride it out till the end and file for bankruptcy.

dragontamer 4y ago

Even if you bought Twitter for $0, you're taking on $13 Billion in loans. You'd have to buy Twitter for *negative* dollars, like -$8 Billion (ie: Elon gives $8 Billion to you and Twitter) to "only" buy the company for $5 Billion effective costs. Note: The $13 Billion loan is likely devalued 30%+, so maybe its only worth $9.5 Billion these days. Hard to say exactly, I'm just making some crude assumptions here. The loans may have been backed by several banks, but they aren't trading on the public market yet so its hard to value them.

dragonwriter 4y ago

> An alternative is that it gets purchased for a few billion dollars by a tech PE firm or Microsoft, which honestly would be a pretty good outcome. But with all the potential outstanding liability? Why not wait until the hammer comes down and the uncertainty is gone to purchase the firm, or whatever assets are useful, unless you really want to beat someone else to the punch?

dragontamer 4y ago
I know you know this, but I'm going to elaborate for others. Bankruptcy is the best time to buy companies. The loans will be rewritten, so you can buy the company's assets _WITHOUT_ taking on any of its liabilities. The Twitter name, trademark, and other assets (maybe source code, servers, data-centers, etc. etc.) all will be up for sale. You can likely buy the "bits of Twitter" you care most about, and leave the other bits for others. I have severe doubts that anyone will want to buy Twitter when it has so much debt under its name. Might as well wait for it to collapse first.
- ericbarrett 4y ago
  Twitter is also under fairly severe consent decrees from both the U.S. and EU. I wonder how those would work if you bought e.g. the trademark?
- jamestimmins 4y ago
  I actually didn't know this, thanks for the info. Would it have to stop operating if it went bankrupt?
  - owenmarshall 4y ago
    It depends. Under US bankruptcy laws corporations can file for bankruptcy for the purpose of reorganization of debts (chapter 11) or for liquidation (chapter 7). Under reorganization the expectation is that you are trying to rehabilitate a failing business that may be profitable again - so the business continues running, and can even borrow money - though your business actions are monitored and ultimately may be approved by the court. Under liquidation, you auction off everything that isn’t bolted down (and some things that are). You usually restructure businesses that could emerge from bankruptcy and be profitable again, and liquidate those that can’t. Which one Twitter may be can be debated.
    - jamestimmins 4y ago
      So in this case, would Elon have to file for bankruptcy and then sell it to someone else to restructure it? If so, what happens with the cash, since I assume the debt-holders have been wiped out?
      - owenmarshall 4y ago
        To restructure he wouldn’t necessarily need to sell: basically, Twitter would put out a restructuring plan that shows how they’re going to fairly pay creditors and bring the business back to profitability. Sometimes that means reducing operations and selling off parts of your business. It often means creditors taking a haircut - because 25% or 50% beats 0%. This often comes in equity in the restructured company in exchange for creditors waiving their claims. Here’s the rub, though: in chapter 11, the courts have a huge role. They approve your restructuring plan only if it’s fair to your creditors. They have to green light quite a few actions you might want to take in the course of running your business. They might form a creditors committee out of the people you owe money to and take their advice on decisions. It’s a long and drawn out process that requires calm leadership willing to work with ones “adversaries” to come to an agreement. And no matter your opinion on Elon, positive or negative, I doubt many people would say his reign at Twitter suggests he’d do that.

dmonitor 4y ago

That’s exactly what the world needs. More tech consolidation under Microsoft.