Musk Informed Banks He Will Reduce Twitter Pay And Make Money From Tweets

According to three people familiar with the situation, Elon Musk promised banks that agreed to help fund his $44 billion acquisition of Twitter Inc that he could cut executive and board pay at the social media business in an effort to minimise expenses, and that he would discover new ways to monetize tweets.

According to the individuals, Musk made the pitch to lenders as he attempted to arrange funding for the buyout days after submitting his bid to Twitter on April 14. On April 21, his disclosure of bank pledges was critical in Twitter’s board accepting his “best and last” offer.

Musk had to persuade the banks that Twitter generated enough cash flow to service the debt he was seeking.

In the end, he was able to acquire $13 billion in loans secured against Twitter, as well as a $12.5 billion margin loan related to his Tesla stock. He promised to pay the balance of the consideration with his own money.

According to the individuals, Musk’s pitch to banks was more about his vision than hard commitments, and the exact cost reduction he will pursue once he buys Twitter are unknown. According to the sources, the proposal he detailed to banks was lacking in depth.

Musk has tweeted about cutting the pay of Twitter’s board directors, which he claims could save the company $3 million. According to corporate documents, Twitter’s stock-based compensation for the fiscal year ending December 31, 2021 was $630 million, a 33% increase from 2020.

In his pitch to financiers, Musk also mentioned Twitter’s gross margin, which is substantially lower than competitors like Meta Platform Inc’s Facebook and Pinterest, claiming that this gives plenty of room to run the company more cost-effectively. Because the topic is private, the sources requested anonymity. A spokesperson for Musk declined to comment.

Earlier on Thursday, Bloomberg News reported that Musk expressly highlighted job cutbacks as part of his presentation to banks. According to one of the insiders, Musk will not make job-cut decisions until he takes over the company later this year. He proceeded with the acquisition despite not having access to private information about the company’s financial performance or headcount.

According to the sources, Musk informed the banks that he also aims to build features to increase business revenue, such as new ways to monetize tweets that contain significant information or go viral.

He proposed charging a fee anytime a third-party website wishes to quote or embed a verified individual’s or organization’s tweet.

Musk proposed a slew of modifications to the social media giant’s Twitter Blue premium subscription service earlier this month, including lowering the price, prohibiting advertising, and allowing users to pay in the cryptocurrency dogecoin. The premium Blue service on Twitter now costs $2.99 per month.

Musk stated in another deleted post that he wants to eliminate Twitter’s reliance on advertising for a large portion of its revenue.

According to the sources, Musk, whose net worth is estimated to be $246 billion, has suggested that he will assist the banks in marketing the syndicated debt to investors, and that he may reveal more specifics about his business plan for Twitter at that time.

Musk has also lined up a new CEO for Twitter, according to one of the individuals, who declined to identify the individual.

The Tesla Inc CEO also told the banks that he will seek moderation policies on the social media site that are as free as feasible within the legal limits of each jurisdiction in which Twitter operates, according to the sources, a view that Musk has publicly stated.

The $13 billion Twitter debt is seven times the company’s estimated earnings before interest, taxes, depreciation, and amortisation in 2022. According to the sources, this was too hazardous for several institutions, who decided to participate exclusively in the margin loan.

According to the sources, another reason some banks opted out is that they believed Musk’s unpredictability would result in a talent exodus from Twitter, damaging the company’s operations.

There was no comment on the issue from Twitter.

(Adapted from WionNews.com)

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