Last year, Twitter’s interest expense was about $50 million. With the new debt taken on in the deal, that will now balloon to about $1 billion a year. Yet the company’s operations last year generated about $630 million in cash flow to meet its financial obligations.
That means that Twitter is generating less money per year than what it owes its lenders. The company also does not appear to have a lot of extra cash on hand. While it had about $6 billion in cash before Mr. Musk’s buyout, a large portion of that probably went into the cost of closing the acquisition.
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To make ends meet, Mr. Musk probably has to slash costs — by a lot. Over the weekend, he was said to be already moving to do so by ordering job cuts across Twitter. One investor who put less than $1 million in the buyout of the company said he was told by the head of Mr. Musk’s family office to expect that around 50 percent of Twitter’s 7,500 employees would be laid off.
>Making no judgements on whether thats a good thing, but Twitter will become a 'Musk Company". And like other Musk company's, he will cut costs until the company is 'break-even
Except that the financing he used to buy Twitter require him to double net revenue immediately[0]. It's not clear he can cut expenses by more than 50% without negatively impacting revenue.
And that's before a massive drop[1] coming from how badly he's handled the acquisition, as well as his personal reputation.
Generously, Twitter was worth half what he paid, 22B at the time he took over, given the decline in the market from when the Twitter tender offer was made.
$13B in loans
$7.1B from equity investors (did they have a liquidation preference?)
How much has he degraded the value by scaring away all the advertisers?
> Last year, Twitter’s interest expense was about $50 million. With the new debt taken on in the deal, that will now balloon to about $1 billion a year.
He's owned Twitter for a few days. He threw out $20 and then adjusted it down to $8, seemingly based on feedback. Did he already know that $8 was the appropriate amount? Was there already some internal analysis done that he is just piggy-backing on? It certainly seems like Musk is making big changes literally moments after arriving on scene.
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