Elon Musk told the banks that agreed to help fund the $ 44 billion acquisition of Twitter Inc that he could cut executive and board salaries in the social media company under pressure to cut costs, and would develop new ways to make money on tweets, three people familiar with the matter said.
Musk lined up for the lenders when he tried to secure debt for the acquisition days after submitting his offer to Twitter on April 1[ads1]4, the sources said. His filing of bank commitments on April 21 was the key to Twitter’s board accepting his “best and final” offer.
Musk had to convince the banks that Twitter was producing enough cash flow to service the debt he was seeking. In the end, he got $ 13 billion in loans secured against Twitter and a margin loan of $ 12.5 billion related to his Tesla share. He agreed to pay for the rest of the consideration with his own money.
Musk’s presentation to the banks was his vision rather than a firm commitment, sources said, and the exact cost cuts he will pursue when he owns Twitter remain unclear. The plan he outlined for the banks was thin on details, the sources added.
Musk has tweeted about eliminating the salaries of Twitter’s board members, which he said could result in about $ 3 million in cost savings. Twitter’s stock-based compensation for the 12 months ended December 31, 2021 was $ 630 million, an increase of 33% from 2020, the company’s records show.
In his pitch to the banks, Musk also pointed to Twitter’s gross margin, which is much lower than peers like Meta Platform Inc’s Facebook and Pinterest, and claimed that this provides ample room to run the company in a more cost-effective way.
The sources asked for anonymity because the case is confidential. A Musk representative declined to comment.
Bloomberg News reported earlier on Thursday that Musk specifically mentioned job cuts as part of its pitch to the banks. One of the sources said that Musk will not make decisions about cuts until he takes over ownership of the company later this year. He proceeded with the acquisition without having access to confidential details about the company’s financial results and number of employees.
Musk told the banks that he also plans to develop features to increase business revenue, including new ways to monetize tweets that contain important information or go viral, the sources said.
Ideas he brought up included charging a fee when a third-party website wants to quote or post a tweet from verified individuals or organizations.
In a tweet earlier this month that he later deleted, Musk suggested a number of changes to the social media giant’s Twitter Blue premium subscription service, including cutting the price, banning advertising and providing an opportunity to pay in the dogecoin cryptocurrency. Twitter’s premium Blue service now costs $ 2.99 a month.
In another tweet he deleted, Musk said he wants to reduce Twitter’s reliance on advertising for much of the revenue.
Musk, whose net worth is set by Forbes at $ 246 billion, has indicated that he will support banks in marketing the syndicated debt to investors, and that he can reveal more details about his business plan for Twitter then, the sources said.
Musk has also set up a new CEO for Twitter, added one of the sources, and refused to name the identity of this person.
FOR RISK OF SOME BANKS
The Tesla Inc. chief also told the banks that he would seek moderation policies on the social media platform that are as free as possible within the legal constraints of each jurisdiction Twitter operates, the sources said, a position Musk has repeated publicly.
The $ 13 billion Twitter loan equals seven times Twitter’s estimated revenue for 2022 before interest, taxes, depreciation and amortization. This was too risky for some banks that decided to only participate in the margin loan, the sources said.
Another reason some banks opted out is because they feared Musk’s unpredictability could lead to a migration of talent from Twitter, and harm the business, according to sources.
A Twitter spokesperson did not respond to a request for comment.
(Reporting by Krystal Hu in New York and Anirban Sen in Bengaluru; Editing by Greg Roumeliotis and Sam Holmes)
(This story has not been edited by NDTV staff and is automatically generated from a syndicated feed.)