Elon Musk told the banks that agreed to help fund his $44 billion takeover of Twitter Inc that he could crack down on executive pay and board pay at the social media company in an effort to cut costs, and would develop new ways to monetize tweets. Three people familiar with the matter said.
Sources said Musk made his bid to lenders trying to secure debts for the days of the takeover after making his bid to Twitter on April 14. His submission of bank commitments on April 21 was key to Twitter’s board accepting his “best and last” offer.
Musk had to convince the banks that Twitter generated enough cash flow to service the debt he sought. In the end, he took out $13 billion in secured loans against Twitter and a $12.5 billion marginal loan tied to his Tesla stock. He agreed to pay the remainder of the consideration with his own money.
The sources said Musk’s offer to the banks shaped his vision rather than firm commitments, and the exact cost reductions he would follow once he acquired Twitter remains unclear. The sources added that the plan he explained to the banks was poor in details.
Musk wrote a tweet about canceling the salaries of Twitter’s board of directors, which he said could save about $3 million in costs. Corporate filings show that Twitter’s stock-based compensation for the 12 months ended December 31, 2021 was $630 million, up 33% from 2020.
In his presentation to the banks, Musk also noted Twitter’s gross margin, which is significantly lower than peers such as Meta Platform Inc’s Facebook and Pinterest, arguing that this leaves plenty of room to run the company in a more cost-effective manner.
The sources requested anonymity because it is a matter of confidentiality. Musk’s representative declined to comment.
Bloomberg News reported earlier Thursday that Musk specifically mentioned job cuts as part of his presentation to banks. One of the sources said Musk will not make decisions about laying off jobs until he takes ownership of the company later this year. He went ahead with the acquisition without obtaining confidential details about the company’s financial performance and number of employees.
The sources said Musk told the banks that he also plans to develop features to increase business revenue, including new ways to make money from tweets that contain important information or go viral.
His ideas included charging fees when a third-party website wants to quote or include a tweet from verified individuals or organizations.
In a tweet earlier this month, which he later deleted, Musk suggested a range of changes to the social media giant’s premium subscription service Twitter Blue, including lowering its price, banning ads, and giving the option to pay in dogecoin cryptocurrency. Twitter’s Blue Premium service now costs $2.99 per month.
In another tweet he deleted, Musk said he wanted to reduce Twitter’s reliance on ads for much of its revenue.
The sources said that Musk, whose net worth Forbes estimated at $ 246 billion, indicated that he would support banks in marketing the combined debt to investors, and that he might reveal more details of his business plan to Twitter at the time.
One source added that Musk has also pitched a new CEO for Twitter, declining to say who that person is.
It poses a significant risk to some banks
The sources said the Tesla Inc CEO has also told banks that it will seek moderation policies on the social media platform that are as free as possible within the legal constraints of each jurisdiction that operates on Twitter, a position that Musk has publicly reiterated.
Twitter’s $13 billion loan is seven times Twitter’s projected 2022 earnings before interest, tax, depreciation, and amortization. The sources said that this represents a huge risk for some banks that have decided to participate only in the marginal loan.
According to the sources, another reason some banks chose not to participate was their fear that Musk’s unpredictability could lead to a mass exodus of talent from Twitter, hurting their business.
A Twitter spokesperson did not respond to a request for comment.
(Additional reporting by Krystal Ho in New York and Anirban Sen in Bengaluru; Editing by Greg Rumiliotis and Sam Holmes)
(This story has not been edited by the NDTV crew and is automatically generated from a shared feed.)
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