4 ms·

Hilton's LBO essentially have saved the brand. Twitter is yet an unfolding story but it seems to be working.

by missedthecue 1y ago

rwmj 1y ago
Was Twitter an LBO? I thought the funding came from Musk taking on the debt.
- kchoudhu 1y ago
  It's still a leveraged buyout.
  - inerte 1y ago
    And Musk didn't act alone, I am not sure how much others contributed, but there were other people/companies involved.
  - rwmj 1y ago
    But wouldn't a "true" LBO be where the acquired company takes on the debt?
- detaro 1y ago
  A big part of why Twitter needed to cut expenses drastically after the buyout was that it suddenly had an extra >1$ billion of yearly debt repayments to handle.
  - watwut 1y ago
    Did not helped they alienated paying customers (as in companies selling ads) at around the day 2 by literally ignoring them and not providing the service.
- ARandumGuy 1y ago
  IIRC Musk wanted to get an LBO, but wasn't able to find anyone willing to loan the money. Keep in mind that a LBO is actually a good deal for the bank, because if the purchased company goes bankrupt, the bank can recoup their investment by liquidating the company. However, that only works if there are assets to liquidate. This can include physical assets, valuable IPs, or favorable lease agreements. In other words, anything that someone else would want to purchase. Twitter, being a website, doesn't have a whole lot of assets they could sell. Which meant that other collateral was required for Musk to secure financing.
  - overfeed 1y ago
    > However, that only works if there are assets to liquidate Ownership of the company itself can be sold, but this only works if there's someone who believes the company was overvalued. Unfortunately for Musk, Twitter's market cap dropped by tens of billions between the time he locked-in his offer and the deal's effective date. It's hard to find banks to fund your LBO when you're paying significantly more than what the market believes the company is worth.
nemo 1y ago
Right now Twitter is steadily shedding users and watching ad revenue steadily drop. Looks like it's in a slow death spiral to me.
- missedthecue 1y ago
  Twitter produced $1.2B in ebitda in 2024 according to the Financial Times. Are you sure you're not mentally operating on 2022 data?
  - churchill 1y ago
    >ebitda Beautiful turnaround if those figures are reliable, but like Munger calls them, EBITDA tends to bullshit metrics derived by cobbling up bullshit to hide that a company is losing cash. Just like Figma booking $700M in 2023 profits which was only possible because of the $1b Adobe breakup fee. Proceeded to lose $732m on $749m in revenues the very next year.
  - Ekaros 1y ago
    I wonder how well they are doing on that "I" there...
cmdli 1y ago
Twitter isn’t collapsing, but it’s hardly more profitable. In fact, the last numbers we know about them show >50% drop in revenue.
- missedthecue 1y ago
  I don't think you're right. During its last fiscal year on the stock market, Twitter reported a net loss of $221 million. We don't have exact insights to X.com's books, but we have credible reports from the Financial Times that they produced over a billion dollars in ebitda in 2024. This is completely possible with a 50% revenue drop. They laid off 80% of the company, something like 6,000 people.
  - cmdli 1y ago
    The reports I have seen have shown significant decreases in revenue, from around $5B in 2021 to $2.5B in 2024: https://www.businessofapps.com/data/twitter-statistics/ https://www.businessofapps.com/data/twitter-statistics/ I’m not sure about profit, but I do know that Twitter made $1.4B in profit in 2019 according to their SEC filings.
  - fair_enough 1y ago
    I follow Charlie Munger's advice and substitute the phrase "bullshit earnings" anywhere I see mention of EBITDA. If the GAAP income is negative, the company lost money last year. End of story.

Hilton's LBO essentially have saved the brand. Twitter is yet an unfolding story but it seems to be working.

rwmj 1y ago

Was Twitter an LBO? I thought the funding came from Musk taking on the debt.

kchoudhu 1y ago
It's still a leveraged buyout.
- inerte 1y ago
  And Musk didn't act alone, I am not sure how much others contributed, but there were other people/companies involved.
- rwmj 1y ago
  But wouldn't a "true" LBO be where the acquired company takes on the debt?
detaro 1y ago
A big part of why Twitter needed to cut expenses drastically after the buyout was that it suddenly had an extra >1$ billion of yearly debt repayments to handle.
- watwut 1y ago
  Did not helped they alienated paying customers (as in companies selling ads) at around the day 2 by literally ignoring them and not providing the service.
ARandumGuy 1y ago
IIRC Musk wanted to get an LBO, but wasn't able to find anyone willing to loan the money. Keep in mind that a LBO is actually a good deal for the bank, because if the purchased company goes bankrupt, the bank can recoup their investment by liquidating the company. However, that only works if there are assets to liquidate. This can include physical assets, valuable IPs, or favorable lease agreements. In other words, anything that someone else would want to purchase. Twitter, being a website, doesn't have a whole lot of assets they could sell. Which meant that other collateral was required for Musk to secure financing.
- overfeed 1y ago
  > However, that only works if there are assets to liquidate Ownership of the company itself can be sold, but this only works if there's someone who believes the company was overvalued. Unfortunately for Musk, Twitter's market cap dropped by tens of billions between the time he locked-in his offer and the deal's effective date. It's hard to find banks to fund your LBO when you're paying significantly more than what the market believes the company is worth.

nemo 1y ago

Right now Twitter is steadily shedding users and watching ad revenue steadily drop. Looks like it's in a slow death spiral to me.

missedthecue 1y ago
Twitter produced $1.2B in ebitda in 2024 according to the Financial Times. Are you sure you're not mentally operating on 2022 data?
- churchill 1y ago
  >ebitda Beautiful turnaround if those figures are reliable, but like Munger calls them, EBITDA tends to bullshit metrics derived by cobbling up bullshit to hide that a company is losing cash. Just like Figma booking $700M in 2023 profits which was only possible because of the $1b Adobe breakup fee. Proceeded to lose $732m on $749m in revenues the very next year.
- Ekaros 1y ago
  I wonder how well they are doing on that "I" there...

cmdli 1y ago

Twitter isn’t collapsing, but it’s hardly more profitable. In fact, the last numbers we know about them show >50% drop in revenue.

missedthecue 1y ago
I don't think you're right. During its last fiscal year on the stock market, Twitter reported a net loss of $221 million. We don't have exact insights to X.com's books, but we have credible reports from the Financial Times that they produced over a billion dollars in ebitda in 2024. This is completely possible with a 50% revenue drop. They laid off 80% of the company, something like 6,000 people.
- cmdli 1y ago
  The reports I have seen have shown significant decreases in revenue, from around $5B in 2021 to $2.5B in 2024: https://www.businessofapps.com/data/twitter-statistics/ https://www.businessofapps.com/data/twitter-statistics/ I’m not sure about profit, but I do know that Twitter made $1.4B in profit in 2019 according to their SEC filings.
- fair_enough 1y ago
  I follow Charlie Munger's advice and substitute the phrase "bullshit earnings" anywhere I see mention of EBITDA. If the GAAP income is negative, the company lost money last year. End of story.