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> Meanwhile, the banks who funded Musk's acquisition are getting antsy. More fleeing advertisers means more lost revenue and more likelihood that the bonds held

by jawns 3y ago

> Meanwhile, the banks who funded Musk's acquisition are getting antsy. More fleeing advertisers means more lost revenue and more likelihood that the bonds held by the financiers are unsellable. This paragraph links to a related piece about CEO Yaccarino's efforts to save the company despite Musk seemingly doing his best to burn it all down: > Yaccarino is reportedly set to meet with Morgan Stanley, Bank of America, British bank Barclays, Japanese banks MUFG and Mizuho, and French financial institutions BNP Paribas and Société Générale to discuss plans not to leave them in the lurch as the value of X's assets have plummeted by two thirds in the past year. > With huge interest payments to those banks continuing to come due and X's value incredibly unclear - but unlikely to have appreciated - the banks might be getting impatient to see some improvement as Musk's first year of ownership draws to a close. I'm very curious to see what happens when X ends up defaulting on these obligations, as it sure looks like it will. Musk didn't seem too concerned about ignoring other contractual obligations, like rent and its AWS bill, nor about paying required severance for laid-off workers, to the tune of $500 million, according to one recent suit. But I imagine that he can't just skip out on his obligation to the banks without a severe reckoning. Can he?

kibwen 3y ago
"If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem."
- dragontamer 3y ago
  Except Twitter is grossly cash-flow negative, and will need new loans to continue surviving. I'm not sure if they're in a position to actively piss off their banking partners.
AYBABTME 3y ago
What kind of recourse do the banks have, in practical terms? My bet is that taking any action is just going to materialize their loss, and inaction and cutting X some/a lot of slack will allow them to perhaps not lose as much in the long term.
- scarface_74 3y ago
  I don’t see any conceivable path for Twitter to turn around and actually be successful. The only tech turnaround of this magnitude that has happened in recent memory is Apple. Jobs was a founder and had the RDF going for him and while he might have pissed off a few people. https://www.reddit.com/r/programming/s/49BWg0N9Xr https://www.reddit.com/r/programming/s/49BWg0N9Xr But at least the employees believed in him and he had the Mac faithful as a base. What does Twitter have?
  - jmye 3y ago
    Vague inertia from journalists and celebrities who don’t want to rebuild follower counts on a new platform? That’s all I’ve got.
  - AYBABTME 3y ago
    It has a lot of users that keep using it, despite all the fud saying otherwise. And they're shipping more features than before, and experimenting more. So it's bound to either die violently or eventually find another growth engine and become a massive opportunity. The "everything apps" abroad are quite good and there's really no equivalent in the US. Twitter/X could be it, although realistically with all the bad karma that Elon is collecting, it'll be tough. But if the silent majority doesn't care and is willing to try out the new features, it'll probably work. I think. I think in the tech community and other luminaries, bien-pensants associated groups, we have a tendency to really exaggerate and delude ourselves into believing what we want to be true in the social world. We dislike person A/idea A so we're convinced anything that has to do with it will fail or has to be some sort of negative spin. In reality I think the average person on this planet is a lot more pragmatic and doesn't necessarily care anywhere as much as loud people do.
    - scarface_74 3y ago
      The number of users using it doesn’t matter if they can’t attract advertisers. Yahoo was one of the most trafficked sites for decades and couldn’t monetize their traffic. And the average person is not using Twitter. There are only 350 million active users worldwide compared to 3 billion Facebook users. Even PInterest has more users https://www.searchlogistics.com/learn/statistics/tiktok-user-statistics/ https://www.searchlogistics.com/learn/statistics/tiktok-user... And Twitter will never be “the everything app” in the US. Apple and Google will never let it and the only reason that worked in other countries is a combination of path dependencies and phones in China are not running “Google Android” and Apple doesn’t have a choice but to be more lax about its App Store policies in China or users of the “everything apps” will revolt.
tambourine_man 3y ago
With virtually unlimited money, there are very few rules that apply to you under capitalism.
- BobaFloutist 3y ago
  Yeah but it's not supposed to have a negative sign next to it, ideally.
NovemberWhiskey 3y ago
>But I imagine that he can't just skip out on his obligation to the banks without a severe reckoning. Can he? If you default on your bonds, your creditors can just force you into bankruptcy. In the context of a Chapter 11 bankruptcy, the company would have to propose a reorganization plan that was acceptable to the creditors. One could imagine a debt-to-equity conversion during which Musk's holdings would effectively become worthless and the banks would end up owning the business. If the bondholders conclude that the business has value, but less if Musk keeps calling the shots, one can imagine an outcome like that. At that point, best case is probably that you'd try to put a turnaround management team in place with a view to taking it public again.
- tomatocracy 3y ago
  Not sure how it might play out in this case but in restructurings there is often a trade off between value destroyed by "kicking equity out" completely and value allocated to creditors vs equity (plus there's often value to agreeing anything rather than dragging it all through the courts which takes a long time, is distracting for management and costs a huge amount). Outcomes in big restructurings where equity walks away with nothing are rarer than you might think.
  - NovemberWhiskey 3y ago
    If the calculus is that "Twitter with Elon" is valueless and "Twitter without Elon" is not, then perhaps this will be the exception that proves the rule.
tomatocracy 3y ago
Ultimately it's a US company so Chapter 11 is available, which does allow for short term relief and ultimately for debts to be restructured etc.
- dragontamer 3y ago
  Don't shareholders traditionally get wiped out in Chapter 11 and then the bondholders (aka: Banks) become the new owners? Do you really think Elon would give up control of Twitter that easily?
timeon 3y ago
Like with Fox News - It is not money what brings value to owners of X.

by jawns 3y ago

kibwen 3y ago

"If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem."

dragontamer 3y ago
Except Twitter is grossly cash-flow negative, and will need new loans to continue surviving. I'm not sure if they're in a position to actively piss off their banking partners.

AYBABTME 3y ago

What kind of recourse do the banks have, in practical terms? My bet is that taking any action is just going to materialize their loss, and inaction and cutting X some/a lot of slack will allow them to perhaps not lose as much in the long term.

scarface_74 3y ago
I don’t see any conceivable path for Twitter to turn around and actually be successful. The only tech turnaround of this magnitude that has happened in recent memory is Apple. Jobs was a founder and had the RDF going for him and while he might have pissed off a few people. https://www.reddit.com/r/programming/s/49BWg0N9Xr https://www.reddit.com/r/programming/s/49BWg0N9Xr But at least the employees believed in him and he had the Mac faithful as a base. What does Twitter have?
- jmye 3y ago
  Vague inertia from journalists and celebrities who don’t want to rebuild follower counts on a new platform? That’s all I’ve got.
- AYBABTME 3y ago
  It has a lot of users that keep using it, despite all the fud saying otherwise. And they're shipping more features than before, and experimenting more. So it's bound to either die violently or eventually find another growth engine and become a massive opportunity. The "everything apps" abroad are quite good and there's really no equivalent in the US. Twitter/X could be it, although realistically with all the bad karma that Elon is collecting, it'll be tough. But if the silent majority doesn't care and is willing to try out the new features, it'll probably work. I think. I think in the tech community and other luminaries, bien-pensants associated groups, we have a tendency to really exaggerate and delude ourselves into believing what we want to be true in the social world. We dislike person A/idea A so we're convinced anything that has to do with it will fail or has to be some sort of negative spin. In reality I think the average person on this planet is a lot more pragmatic and doesn't necessarily care anywhere as much as loud people do.
  - scarface_74 3y ago
    The number of users using it doesn’t matter if they can’t attract advertisers. Yahoo was one of the most trafficked sites for decades and couldn’t monetize their traffic. And the average person is not using Twitter. There are only 350 million active users worldwide compared to 3 billion Facebook users. Even PInterest has more users https://www.searchlogistics.com/learn/statistics/tiktok-user-statistics/ https://www.searchlogistics.com/learn/statistics/tiktok-user... And Twitter will never be “the everything app” in the US. Apple and Google will never let it and the only reason that worked in other countries is a combination of path dependencies and phones in China are not running “Google Android” and Apple doesn’t have a choice but to be more lax about its App Store policies in China or users of the “everything apps” will revolt.

tambourine_man 3y ago

With virtually unlimited money, there are very few rules that apply to you under capitalism.

BobaFloutist 3y ago
Yeah but it's not supposed to have a negative sign next to it, ideally.

NovemberWhiskey 3y ago

>But I imagine that he can't just skip out on his obligation to the banks without a severe reckoning. Can he? If you default on your bonds, your creditors can just force you into bankruptcy. In the context of a Chapter 11 bankruptcy, the company would have to propose a reorganization plan that was acceptable to the creditors. One could imagine a debt-to-equity conversion during which Musk's holdings would effectively become worthless and the banks would end up owning the business. If the bondholders conclude that the business has value, but less if Musk keeps calling the shots, one can imagine an outcome like that. At that point, best case is probably that you'd try to put a turnaround management team in place with a view to taking it public again.

tomatocracy 3y ago
Not sure how it might play out in this case but in restructurings there is often a trade off between value destroyed by "kicking equity out" completely and value allocated to creditors vs equity (plus there's often value to agreeing anything rather than dragging it all through the courts which takes a long time, is distracting for management and costs a huge amount). Outcomes in big restructurings where equity walks away with nothing are rarer than you might think.
- NovemberWhiskey 3y ago
  If the calculus is that "Twitter with Elon" is valueless and "Twitter without Elon" is not, then perhaps this will be the exception that proves the rule.

tomatocracy 3y ago

Ultimately it's a US company so Chapter 11 is available, which does allow for short term relief and ultimately for debts to be restructured etc.

dragontamer 3y ago
Don't shareholders traditionally get wiped out in Chapter 11 and then the bondholders (aka: Banks) become the new owners? Do you really think Elon would give up control of Twitter that easily?

timeon 3y ago

Like with Fox News - It is not money what brings value to owners of X.