Elon Musk tells banks that have agreed to help fund his $44 billion takeover of Twitter Inc that he could cut executive and board salaries at the social media company aims to reduce costs and will develop new ways to monetize tweets, three people familiar with the matter said.
Sources say Musk made offers to lenders trying to secure debt for buyback dates after posting his offer on Twitter on April 14. His submission The April 21 banking commitments were key for Twitter’s board to accept his “best and last” offer.
Musk had to convince the banks that Twitter generated enough cash flow to pay the debt he sought. In the end, he got a guaranteed $13 billion loan based on Twitter and a $12.5 billion margin loan tied to his Tesla stock. He agrees to pay the rest of the deliberations with his own cash.
Sources say Musk’s pitch to banks is his vision rather than firm commitments, and that the exact cost-cutting he will pursue while owning Twitter is not yet clear. clear. The source added that the plan he outlined for the banks is very slim.
Musk tweeted about eliminating Twitter’s board directors’ salaries, which he said could save about $3 million in costs. Twitter’s stock-based compensation for the 12 months ended December 31, 2021 was $630 million, up 33% from 2020, company filings show.
In his pitch to banks, Musk also pointed to Twitter’s gross margin, which is much lower than peers like Facebook and Pinterest of Meta Platform Inc, arguing that this leaves plenty of room to run the company in a more cost effective way.
The sources requested anonymity because the matter was confidential. Musk’s representatives declined to comment.
Bloomberg News reported earlier on Thursday that Musk specifically mentioned job cuts as part of his pitch to banks. One of the sources said that Musk won’t make a decision to cut jobs until he assumes ownership of the company later this year. He proceeded with the acquisition without access to the confidential details of the company’s financial performance and headcount.
Musk told banks he also plans to develop features to increase business revenue, including new ways to monetize tweets containing important information or go viral, sources said. .
The idea he came up with included charging a fee when a third-party website wanted to quote or embed a tweet from verified individuals or organizations.
In a tweet earlier this month, which he later deleted, Musk suggested a series of changes to the social media giant’s paid subscription service Twitter Blue, including discounts, banning ads, and more. reports and offers an option to pay with dogecoin cryptocurrency. Twitter’s premium Blue service currently costs $2.99 a month.
In another tweet he deleted, Musk said he wanted to reduce Twitter’s reliance on ads for the majority of Twitter’s revenue.
Musk, whose net worth is pegged by Forbes at $246 billion, said he would help banks market the syndicated debt to investors and that he could reveal more details about his plan. his business plan for Twitter then, sources said.
Musk has also arranged a new CEO for Twitter, one of the sources added, declining to identify that person.
TOO RISK FOR SOME BANKS
The Tesla Inc CEO also told banks that he would seek to regulate the social media platform as free as possible within the legal constraints of each jurisdiction in which Twitter operates. active, sources said, a view Musk has repeated publicly.
Twitter’s $13 billion loan equates to seven times Twitter’s projected 2022 earnings before interest, taxes, amortization, and amortization. Sources say this is too risky for some banks to decide to engage only in margin lending.
Another reason some banks have opted out is because they fear Musk’s unpredictability could lead to the removal of talent from Twitter, harming its business, according to sources. believe.
A Twitter spokesperson did not respond to a request for comment.
