Musk offers to buy Twitter

[Nycturne]

When you don't have enough money to pay all the bills and debts, it's "rational" to prioritize paying those that are going to hurt the most if they don't get paid.......in twitter's current situation, paying the interest on the borrowed purchase money is probably much more urgent for Musk than paying rents or the twitter lawyers's bills.

To a point. But generally you start with renegotiation. Some sign of good faith. That’s not what is happening here.

Whether it's a personal debt or Twitter's corporate debt doesn't make a lot of difference if it means the company is going into bankruptcy if the interest doesn't get "paid".

It does in the sense that there is nothing requiring Musk to dip into his own assets to keep the company afloat so long as restructuring debt is an option. That’s my confusion when it comes to discussion over Musk owing interest. If Musk does put personal assets into Twitter to prop it up against the crushing debt he placed on it as part of the buyout, that’s just throwing good money after bad.

 

[lizkat]

This is where I get a bit confused though. In a leveraged buyout like this, the debt would usually become Twitter's, rather than Musk's. So it's weird to me to conflate the two like Forbes does here. Unless Musk is holding onto the debt as a personal liability or somehow intends to continue to infuse personal assets to keep the company aloft, in either case he's an even bigger idiot than I thought. That said, I could certainly see some financial plays in the form of refinancing or the like as a way to avoid bankruptcy.

As I said, about the only rational reason I can think of to ignore the bills is if you're planning on getting those debts dismissed. I never claimed Musk was acting rationally. The more I see about his history in business, the more I realize his image has been well curated to avoid revealing he's just really bad at this (but lucky), and is incredibly petty.

Well it's not clear to me that any other lender or co-investor wants to step up and increase their own investment by making a giant infusion of cash into Twitter right now to try to stave off default on the interest payment. He paid $44B for it and a common figure for its worth lately is more like $15B... probably extrapolated from knowing that Fidelity has a publicly traded fund that holds its Twitter stake in Musk's company and that they have so radically marked down.

So although it's true that the private company Twitter (and not Musk himself) is having to make that interest payment, he's the only one likely to put a floor under the books. Somewhere I read that the company had around a billion dollars in cash or equivalent.

From that Forbes piece

According to The Financial Times (FT), “Fidelity, which owns a stake in the social media platform through a listed fund, has cut the value of its holding [by 56%] from $19.7 million in October to $8.6 million after Musk closed the deal. Technology equity analyst Dan Ives at Wedbush Securities said that Twitter was worth closer to $15 billion [on January 17] than the $44 billion Musk paid for it [a 66% decline].”

The problem is Musk's reliance on Tesla as a source of his ability to pony up more to keep Twitter afloat while he figures out how --if possible-- to get a revenue stream coming into Twitter. The company likely can't afford to buy a bolt-on cash-generating app or build one right now anyway. And per his Tesla public filings, he has already pledged 63% of his own Tesla holdings as collateral.

Reuters had a piece back in the fall with some details about Twitter as it transitioned to ownership by Musk.

Analysis: Twitter's 'massive' revenue drop adds to heavy debt burden

Elon Musk's revelation that Twitter has suffered a "massive" revenue drop since he took over 10 days ago underscores the precarious nature of the social media company's finances after he saddled it with $13 billion in debt, credit experts say.

www.reuters.com

 

[Macky-Mac]

To a point. But generally you start with renegotiation. Some sign of good faith. That’s not what is happening here....

that just shows how much of a problem he's made for himself......he won't even take the time to deal with some of his creditors since he's too busy trying to raise money to avoid the crash

....If Musk does put personal assets into Twitter to prop it up against the crushing debt he placed on it as part of the buyout, that’s just throwing good money after bad.

He did realize that his offer of $44billion was way too much, that he'd made a major mistake, and he tried to get out of buying the company. I'm remembering (probably incorrectly) that it was going to cost him around a billion to get out of the deal, and not wanting to lose a billion, he went ahead with the purchase......opps!

Twitter was in much worse shape than he thought and he made it even more of a disaster by scaring off the advertisers.....so yes, certainly to us it looks like he's just throwing good money after bad.....but he just may not be willing to accept saying good bye to all that he's sunk into the situation.

He can afford it though. He'll still have a pile of money even if Twitter goes under.

And maybe Trump's reported return will save him......

 

[Nycturne]

So although it's true that the private company Twitter (and not Musk himself) is having to make that interest payment, he's the only one likely to put a floor under the books. Somewhere I read that the company had around a billion dollars in cash or equivalent.

True. I guess I’m just the type that would try to cut the losses. Especially if the alternative was to risk losing control of something like Tesla.

The problem is Musk's reliance on Tesla as a source of his ability to pony up more to keep Twitter afloat while he figures out how --if possible-- to get a revenue stream coming into Twitter. The company likely can't afford to buy a bolt-on cash-generating app or build one right now anyway. And per his Tesla public filings, he has already pledged 63% of his own Tesla holdings as collateral.

Reuters had a piece back in the fall with some details about Twitter as it transitioned to ownership by Musk.

Analysis: Twitter's 'massive' revenue drop adds to heavy debt burden

Elon Musk's revelation that Twitter has suffered a "massive" revenue drop since he took over 10 days ago underscores the precarious nature of the social media company's finances after he saddled it with $13 billion in debt, credit experts say.

www.reuters.com

I guess the question is ultimately, did Musk leave Tesla stock as collateral after the debt was restructured under Twitter? If so, that’s a boneheaded move, IMO. He’d be one of the few leveraged buyouts in recent memory where the buyer left themselves exposed on the debt. And since the books are now closed, good luck finding out until after this is all over.

that just shows how much of a problem he's made for himself......he won't even take the time to deal with some of his creditors since he's too busy trying to raise money to avoid the crash

Agreed.

Twitter was in much worse shape than he thought and he made it even more of a disaster by scaring off the advertisers.....so yes, certainly to us it looks like he's just throwing good money after bad.....but he just may not be willing to accept saying good bye to all that he's sunk into the situation.

Well, to be fair, while Twitter wasn’t a profit machine before, it’s generally easier when you don’t saddle a company with a bunch of additional debt from a leveraged buyout. This is not a new problem, and many companies that have been part of leveraged buyouts simply collapse under the debt due to inability to chase after opportunities even when the debt isn’t directly crippling. Toys’R’Us for example. I just don’t think I’ve seen a company suffer such a crisis so quickly after a buyout.

 

[dada_dave]

 

[Eric]

View attachment 21494

Reminds us of this one, the internet never forgets.

 

[lizkat]

WSJ reported today that Musk had floated the idea in December of trying to raise $3 billion in new funding, to ditch the part of the $13B loan that has the highest interest rate. Current status of such talks is not known. link (paywall lifted)

Twitter’s unsecured bridge loans, which total $3 billion, are the most expensive portion of the $13 billion debt package Mr. Musk incurred as part of his $44 billion acquisition of the social-media company. They carry an interest rate of 10% plus the secured overnight financing rate, a benchmark interest rate that has shot up in recent months and currently sits at 4.3%.

With every quarter that passes without Twitter refinancing the debt, the interest rate goes up by an additional 0.50 percentage point, according to regulatory filings. Twitter’s first quarterly interest payment is due at the end of the month, the filings show.

Twitter’s annual interest burden has increased by over $100 million since he announced the takeover deal last April, as the overnight rate has increased. At the time of the announcement, the overnight rate was 0.3%.

Repaying the unsecured bridge loans would leave Twitter with a debt burden that has much more manageable interest rates. Twitter’s $6.5 billion in term loans and $3 billion in secured bridge loans carry an annual interest burden of 4.75% and 6.75%, respectively, plus the overnight rate, according to public filings.

 

[dada_dave]

WSJ reported today that Musk had floated the idea in December of trying to raise $3 billion in new funding, to ditch the part of the $13B loan that has the highest interest rate. Current status of such talks is not known. link (paywall lifted)

I’ll admit my business experience is zilch, but if that were possible to do, then wouldn’t that have been better (and easier) to do initially? -you know before he tanked the value of the company he vastly overpaid for? I thought one only accepted really high interest loans when there wasn’t another option …

 

[lizkat]

I’ll admit my business experience is zilch, but if that were possible to do wouldn’t that have been better (and easier) to do initially? -you know before he tanked the value of the company he vastly overpaid for?

Well certainly easier to do if he'd floated the idea before Fidelity marked down its holding (which was stashed in a publicly traded fund) by 56% and so created a public record of a "market" for the other lenders to ponder --while those banks were probably trying to temper footnotes about their own markdowns with assorted reasons for being more optimistic.

But one can see why Musk would like to do this. The part of the debt package that he's trying to ditch is at 11.75% and it's secured only by a margin loan on some of his Tesla stock. Not only he but Tesla shareholders would like to see that situation go away.

I thought one only accepted really high interest loans when there wasn’t another option …

Yeah. He was between a rock and a hard place when he took that margin loan to finish the financing.

 

[Nycturne]

And to be honest, I’m not too surprised there’s some unfavorable terms on some of the debt taken on for the purchase. Yes, you don’t normally take debt like that if you have a choice, but Musk was being sued to complete the buyout. It’s quite possible he was between a rock and a hard place when it came to finalizing financing.

 

[Cmaier]

Apple Fellow Phil Schiller confirms he's now on Mastodon after deleting Twitter account

Following all the mess happening to Twitter after the company was acquired by Elon Musk, Apple Fellow and former Apple marketing chief Phil Schiller has deleted his account on the platform. However, those who still want updates from Schiller can now follow him on Mastodon. As noted by Mastodon...

9to5mac.com

 

[mr_roboto]

I hope that's a hint of things to come. It's more than a bit overdue for Apple to stop buying ads. They shouldn't be supporting a site run by a guy who just can't stop himself from trying to pal up with neo-nazis.

 

[mr_roboto]

He did realize that his offer of $44billion was way too much, that he'd made a major mistake, and he tried to get out of buying the company. I'm remembering (probably incorrectly) that it was going to cost him around a billion to get out of the deal, and not wanting to lose a billion, he went ahead with the purchase......opps!

This is a common misconception. It's rooted in an easily misunderstood fact - the billion dollar penalty clause was real. But Musk couldn't actively choose to use it and walk away. It only applied if, after signing the contract, Musk's side experienced a financial collapse so bad it could not raise enough cash to pay Twitter's shareholders. And, very importantly, this was under jurisdiction of Delaware's chancery courts, which have been known to enforce similar M&A contracts by seizing corporate assets and selling off enough to pay the other party. He wasn't going to be able to get away with just refusing to pay until the clock ran out and Twitter's board sued him for $1B.

 

[Cmaier]

Gurman is now on mastodon. @markgurman@mastodon.social.

Perhaps he can block me there, too, for pointing out that the publication he works for still hasn’t produced any evidence that Apple’s servers were compromised by spy chips.

 

[Andropov]

It seems like Twitter is now inserting ads in tweet replies too. Got me confused a few times. I guess the click through ratio must be higher at first, until people start realizing that some of the replies are ads now.

Also, this:

Twitter will charge developers to access its API starting February 9th | Engadget

The website has announced through its Twitter Dev account that it will no longer support free access to its API, both versions 1.1 and 2, starting on February 9th..

www.engadget.com

Starts Feb 9th. Lol.

 

[Cmaier]

If you are using “sign in with twitter” on any other websites, you may want to go ahead and see if there is a way to transfer your account to a different sign-on method. I wouldn’t bet on twitter offering that functionality (for free), or maybe twitter even existing, into the indefinite future.

 

[rdrr]

If you are using “sign in with twitter” on any other websites, you may want to go ahead and see if there is a way to transfer your account to a different sign-on method. I wouldn’t bet on twitter offering that functionality (for free), or maybe twitter even existing, into the indefinite future.

Are you hearing anything from some sources on this warning? I would also question the security around twitter now as well. After laying off almost all of the server/network/security folks in IT, who is keeping up with the daily care and feeding which helps mitigate potential breaches.

 

[Cmaier]

Are you hearing anything from some sources on this warning? I would also question the security around twitter now as well. After laying off almost all of the server/network/security folks in IT, who is keeping up with the daily care and feeding which helps mitigate potential breaches.

No sources. Just watching the progression of behavior by twitter - the latest being effectively eliminating the API entirely (by stating that they are going to charge for it, and not stating how much.)

They are taking desperate and short-sighted measures akin to looking for change in the sofa cushions. They seem to be bleeding users (since it seems engagement has gone down quite a bit). If I was using sign-in with twitter (I don’t), I’d be wary.

Also: if Elon is willing to take private messages and parcel them out for political purposes, who’s to say he won’t use twitter’s information on your interactions with other web services for nefarious purposes?

For the same reason, if they go ahead and introduce a “pay with twitter“ (like they are threatening to), you’d have to be nuts to use it.

 

[lizkat]

No sources. Just watching the progression of behavior by twitter - the latest being effectively eliminating the API entirely (by stating that they are going to charge for it, and not stating how much.)

They are taking desperate and short-sighted measures akin to looking for change in the sofa cushions. They seem to be bleeding users (since it seems engagement has gone down quite a bit). If I was using sign-in with twitter (I don’t), I’d be wary.

Also: if Elon is willing to take private messages and parcel them out for political purposes, who’s to say he won’t use twitter’s information on your interactions with other web services for nefarious purposes?

For the same reason, if they go ahead and introduce a “pay with twitter“ (like they are threatening to), you’d have to be nuts to use it.

Seems to me like Musk is throwing pasta on the wall to see what sticks while trying to grow a user base without turning away what there was to begin with... but he's failing to acknowledge reality that some of those moves have already driven away key underwriters --brand ads, members with big followings-- and that his frequent 180s and other backing and filling exacerbates the drain of potentially useful (voluntary revenue generating) membership, not to mention sometimes consumes programming resources already made too thin.

 

[Cmaier]

Brent Simmons (@brentsimmons@indieweb.social)

We will have to remove Twitter integration from NetNewsWire.

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