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I think he's just looking at this rationally, as he should as a major share holder. His job is not to be nice but to deliver share holder value. That seems to b
by jillesvangurp 3y ago
I think he's just looking at this rationally, as he should as a major share holder. His job is not to be nice but to deliver share holder value. That seems to be a thing that people just don't get. The debate around Twitter seems very emotional and opinionated.
But it's really quite simple:
Twitter had a spending problem. The history of that is actually not all that relevant. The ugly handover did not help of course and that caused a dip in advertising that combined with macro economic circumstances is just causing a massive cash flow problem. Like it or not, that problem added up to negative a few billion per year. Apparently things have recovered somewhat since Elon Musk started 'fixing' things but it's still not a great situation.
The bottom line is that an expensive office in Boulder Colorado is probably pretty high on the list of things to immediately cut. No matter how you look at what happened in Twitter, paying lots of cash for office space you don't need is not a great thing.
Office leases normally run for several years. So, a simple way to force the issue is to freeze the payments. You'll get evicted and sued, naturally. But what does this really mean in a situation where you just downsized staff by two thirds and they were reluctant to come back to the office anyway after Covid? Just making the point that the value of that office for Twitter was probably very low.
Not nice to do business like that, of course. But it is what it is and being nice is not the main job right now. Fixing the cash flow issues is. Paying for a mostly empty office in Colorado just isn't a high priority.
I don't actually see this having an unhappy end for Twitter. There will be some kind of settlement at some point and that will be it. The real estate market is imploding everywhere. So, the building owners might cut their losses at some point depending on how deep their pockets are and how big their stamina for pursuing this in the courts is. I have actually no idea how the real estate market in Colorado is but I imagine that won't be the only empty office in the area. Or judging from recent other articles on HN, everywhere else. Real estate is not a great business to be in right now.
There's more than a bit of a bubble there. Get a big fancy office, put a lot of overpaid staff in it, ????, profit. That ship has sailed. Twitter fired two thirds of their people and they are still there and they need a lot less office space now. Was that ugly: yes. How could it not be. But it happened and the situation needs fixing.
These are not the only creditors of course and I'm sure most are counting their cards right now and are going to be a lot more open to settling sooner rather than later. Not a bad outcome for Twitter if that works.
- bluefishinit 3y ago> I think he's just looking at this rationally, as he should as a major share holder. His job is not to be nice but to deliver share holder value I was an avid Twitter user, but stopped using it because I find Musk super annoying and unethical. This is part of that. Complete and total brand destruction. That's not "delivering shareholder value". There's been massive markdowns to Twitter's valuation since Musk took over.
- telotortium 3y ago> There's been massive markdowns to Twitter's valuation since Musk took over. That valuation was itself at the height of the COVID stock bubble.
- bluefishinit 3y agoObviously Musk thought it was a fair valuation since he paid it. He then decimated the company value by saddling it with unsustainable debt, chasing off advertising revenue and lighting the brand on fire, none of which have anything to do with COVID.
- superchroma 3y agoLet us be real here and acknowledge that he played around, made a big mistake and got called up to honor a bid he evidently didn't really stand behind. If he wanted twitter he could have been a lot more purposeful about acquiring it.
- phpisthebest 3y agoyea, everyone here is acting like Twitter is the only company doing this. The news has all kinds of stories about large commercial properties being surrendered to lenders, people backing out leases. etc Commercial Real Estate in many cities is in a death spiral
- martin8412 3y agoTwitter did not in fact have that major of a spending problem. It was a somewhat profitable company, not greatly so, but not deep in the red. It however does now have a problem after Musk saddled it with debt that's going to cost $1B a year to service alone. I don't know who owns the real estate, but it's not a difficult win. The terms of the lease is clear, and Twitter has the money to pay.