San Francisco: Elon musk Told the banks that had agreed to help fund their $44 billion acquisition Twitter Inc. Three people familiar with the matter said it may be cracking down on executive and board salaries at the social media company to reduce costs, and will develop new ways to monetize Tweets.
Sources said Musk made the pitch to lenders as he tried to secure a loan for the purchase days after he submitted his offer on Twitter on April 14. The submission of his bank commitments on April 21 was crucial for Twitter’s board to accept his “best and final” offer.
Musk had to convince banks that Twitter produced enough cash flow to service the loans he sought. In the end, he secured $13 billion in loans secured against Twitter and $12.5 billion in margin loans from his Tesla stock. He agreed to pay for the balance with his own cash.
Musk’s pitch to Banks constitutes his vision rather than firm commitments, the sources said, and the exact cost-cutting he will do once he owns Twitter is unclear. Sources said the plan he told banks was thin in detail.
Musk has tweeted about eliminating the salaries of Twitter’s board of directors, which he said has resulted in nearly $3 million in cost savings. Twitter’s stock-based compensation for the 12 months ended December 31, 2021 was $630 million, a 33% increase from 2020, corporate filings show.
In his pitch to banks, Musk also pointed to Twitter’s gross margins, which are much lower than Meta Platform Inc.’s peers like Facebook and Pinterest, arguing that it’s more cost-effective to run the company. There’s plenty of room for it.
The sources requested anonymity as the matter is confidential. A Musk representative declined to comment.
Bloomberg News reported earlier on Thursday that Musk specifically mentioned the job cuts as part of his pitch to banks. One of the sources said Musk will not make a decision on job cuts until he assumes ownership of the company later this year. They proceeded with the acquisition without knowing confidential information about the company’s financial performance and workforce.
Musk told the banks that he also plans to develop features to increase business revenue, including new ways to make money from tweets containing important information or go viral, the sources said.
When a third-party website wishes to quote or embed Tweets from verified individuals or organizations, the views they bring include charging a fee.
In a tweet he later deleted earlier this month, Musk suggested several changes to the social media giant Twitter Blue Premium subscription service, which includes lowering its price, banning advertising, and offering the option to pay in the cryptocurrency Dogecoin. Twitter’s premium Blue service now costs $2.99 a month.
In another tweet he deleted, Musk said he wanted to reduce Twitter’s reliance on advertising for most of its revenue.
Musk, whose net worth is estimated at $246 billion by Forbes, has indicated he will support banks in marketing syndicated loans to investors, and he may reveal more details of his business plan to Twitter, according to sources. he said.
Musk has also roped in a new chief executive for Twitter, with one of the sources refusing to name the person’s identity.
too risky for some banks
Tesla Inc. The chief executive also told Banks that he would seek moderation policies on social media platforms that are as independent as possible within the legal constraints of each jurisdiction that Twitter operates in, the sources said, a position that Musk has publicly reiterated. .
The $13 billion Twitter debt is equivalent to seven times Twitter’s estimated 2022 earnings before interest, taxes, depreciation and amortization. Sources said it was too risky for some banks, who decided to participate in margin lending only.
Another reason some banks pulled out, according to sources, is that they feared Musk’s unpredictability could result in a talent drain from Twitter, which could hurt its business.
A Twitter spokesperson did not respond to a request for comment.
Sources said Musk made the pitch to lenders as he tried to secure a loan for the purchase days after he submitted his offer on Twitter on April 14. The submission of his bank commitments on April 21 was crucial for Twitter’s board to accept his “best and final” offer.
Musk had to convince banks that Twitter produced enough cash flow to service the loans he sought. In the end, he secured $13 billion in loans secured against Twitter and $12.5 billion in margin loans from his Tesla stock. He agreed to pay for the balance with his own cash.
Musk’s pitch to Banks constitutes his vision rather than firm commitments, the sources said, and the exact cost-cutting he will do once he owns Twitter is unclear. Sources said the plan he told banks was thin in detail.
Musk has tweeted about eliminating the salaries of Twitter’s board of directors, which he said has resulted in nearly $3 million in cost savings. Twitter’s stock-based compensation for the 12 months ended December 31, 2021 was $630 million, a 33% increase from 2020, corporate filings show.
In his pitch to banks, Musk also pointed to Twitter’s gross margins, which are much lower than Meta Platform Inc.’s peers like Facebook and Pinterest, arguing that it’s more cost-effective to run the company. There’s plenty of room for it.
The sources requested anonymity as the matter is confidential. A Musk representative declined to comment.
Bloomberg News reported earlier on Thursday that Musk specifically mentioned the job cuts as part of his pitch to banks. One of the sources said Musk will not make a decision on job cuts until he assumes ownership of the company later this year. They proceeded with the acquisition without knowing confidential information about the company’s financial performance and workforce.
Musk told the banks that he also plans to develop features to increase business revenue, including new ways to make money from tweets containing important information or go viral, the sources said.
When a third-party website wishes to quote or embed Tweets from verified individuals or organizations, the views they bring include charging a fee.
In a tweet he later deleted earlier this month, Musk suggested several changes to the social media giant Twitter Blue Premium subscription service, which includes lowering its price, banning advertising, and offering the option to pay in the cryptocurrency Dogecoin. Twitter’s premium Blue service now costs $2.99 a month.
In another tweet he deleted, Musk said he wanted to reduce Twitter’s reliance on advertising for most of its revenue.
Musk, whose net worth is estimated at $246 billion by Forbes, has indicated he will support banks in marketing syndicated loans to investors, and he may reveal more details of his business plan to Twitter, according to sources. he said.
Musk has also roped in a new chief executive for Twitter, with one of the sources refusing to name the person’s identity.
too risky for some banks
Tesla Inc. The chief executive also told Banks that he would seek moderation policies on social media platforms that are as independent as possible within the legal constraints of each jurisdiction that Twitter operates in, the sources said, a position that Musk has publicly reiterated. .
The $13 billion Twitter debt is equivalent to seven times Twitter’s estimated 2022 earnings before interest, taxes, depreciation and amortization. Sources said it was too risky for some banks, who decided to participate in margin lending only.
Another reason some banks pulled out, according to sources, is that they feared Musk’s unpredictability could result in a talent drain from Twitter, which could hurt its business.
A Twitter spokesperson did not respond to a request for comment.