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I’m learning more about the Twitter situation slowly. Why did it take on massive debt?

by Choco31415 3y ago

minimaxir 3y ago
Because Elon was forced to overpay for Twitter and getting that much money is difficult.
- dehrmann 3y ago
  Saying he was "forced to overpay" isn't a fair characterization. As a joke that went too far, he voluntarily offered to overpay at what in hindsight was the peak, then signed a contract making it official. He was only forced to uphold the contract.
  - minimaxir 3y ago
    Fair elaboration.
nickthegreek 3y ago
Musk did that to finance his purchase.
hrisng 3y ago
Leveraged buyout. Twitter is now forced to carry the debt that incurred from its own acquisition
- Choco31415 3y ago
  That doesn't make sense. Why is Twitter forced to hold the debt for being purchased and not Elon? Looking at the numbers that is a lot of debt: https://www.wsj.com/articles/elon-musks-twitter-takeover-seen-swelling-the-companys-debt-11666609106 https://www.wsj.com/articles/elon-musks-twitter-takeover-see... "As part of the deal, Twitter will add about $13 billion of debt. Analysts estimate, based on terms previously laid out in documents related to the transaction, that Twitter would be on the hook for annual interest payments of more than $1 billion, compared with some $51 million in 2021."
  - sanderjd 3y ago
    > Why is Twitter forced to hold the debt for being purchased and not Elon? Just because that's what was written into the contract when the acquisition happened. Something different could have been put in the contract, but this is what was actually written in it and signed off on by all the parties to the deal.
  - AmIDev 3y ago
    That is no different than buying a house with a loan, where the loan is backed by the same house.
- rsynnott 3y ago
  Incidentally, has there ever been a leveraged buyout that wasn’t a disaster? Presumably there must be some which are a success at least for the buyer, or people wouldn’t keep doing it, but it really doesn’t seem to have a great track record for anyone involved, as a strategy.
  - HDThoreaun 3y ago
    Yes, private equity has been incredibly successful in the last decade. Usually not overpaying to buy a $44 billion dollar company though.

I’m learning more about the Twitter situation slowly. Why did it take on massive debt?

minimaxir 3y ago

Because Elon was forced to overpay for Twitter and getting that much money is difficult.

dehrmann 3y ago
Saying he was "forced to overpay" isn't a fair characterization. As a joke that went too far, he voluntarily offered to overpay at what in hindsight was the peak, then signed a contract making it official. He was only forced to uphold the contract.
- minimaxir 3y ago
  Fair elaboration.

nickthegreek 3y ago

Musk did that to finance his purchase.

hrisng 3y ago

Leveraged buyout. Twitter is now forced to carry the debt that incurred from its own acquisition

Choco31415 3y ago
That doesn't make sense. Why is Twitter forced to hold the debt for being purchased and not Elon? Looking at the numbers that is a lot of debt: https://www.wsj.com/articles/elon-musks-twitter-takeover-seen-swelling-the-companys-debt-11666609106 https://www.wsj.com/articles/elon-musks-twitter-takeover-see... "As part of the deal, Twitter will add about $13 billion of debt. Analysts estimate, based on terms previously laid out in documents related to the transaction, that Twitter would be on the hook for annual interest payments of more than $1 billion, compared with some $51 million in 2021."
- sanderjd 3y ago
  > Why is Twitter forced to hold the debt for being purchased and not Elon? Just because that's what was written into the contract when the acquisition happened. Something different could have been put in the contract, but this is what was actually written in it and signed off on by all the parties to the deal.
- AmIDev 3y ago
  That is no different than buying a house with a loan, where the loan is backed by the same house.
rsynnott 3y ago
Incidentally, has there ever been a leveraged buyout that wasn’t a disaster? Presumably there must be some which are a success at least for the buyer, or people wouldn’t keep doing it, but it really doesn’t seem to have a great track record for anyone involved, as a strategy.
- HDThoreaun 3y ago
  Yes, private equity has been incredibly successful in the last decade. Usually not overpaying to buy a $44 billion dollar company though.