1. Home
  2. Business
  3. After Twitter buyout, Elon Musk plans to limit pay, make money from tweets

After Twitter buyout, Elon Musk plans to limit pay, make money from tweets

By Saima Siddiqui 
Updated Date

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

Also Read :- Elon Musk set to become number-one influencer on Twitter, ready to surpass former US President Barack Obama

According to the individuals, Musk made the pitch to bankers as he attempted to arrange funding for the buyout days after submitting his bid to Twitter on April 14. His financial pledges, which he submitted on April 21, were crucial in Twitter’s board accepting his “best and final” bid.

Musk had to persuade the banks that Twitter’s cash flow was sufficient to cover the loan 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 secured against his Tesla Inc equity. He promised to pay the balance of the payment with his own money.

According to the sources, Musk’s pitch to the banks consisted of his vision rather than solid pledges, and the exact cost reduction he would seek once he controls Twitter are unknown. According to the sources, the proposal he detailed to banks was lacking in depth.

Musk has tweeted about cutting the wages of Twitter’s board directors, which he claims will save the company $3 million. According to corporate documents, Twitter’s stock-based compensation for the 12 months ended December 31, 2021 was $630 million, up 33% from 2020.

Also Read :- Twitter owner Elon Musk says difficult process of staff layoffs to begin today

Musk also used Twitter’s gross margin, which is substantially lower than peers like Meta Platforms Inc’s Facebook and Pinterest, in his presentation to the banks, claiming that this gives lots of room to run the firm more cost-effectively.

Because the topic is private, the sources requested anonymity. Musk’s spokesperson declined to comment.

As per Thursday media report that Musk specifically mentioned job cuts as part of his pitch to the banks. One of the sources said that Musk will not make decisions on job cuts until he assumes ownership of the company later this year. He went ahead with the acquisition without having access to confidential details on the company’s financial performance and headcount.

Musk told the banks he also plans to develop features to grow business revenue, including new ways to make money out of 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 embed a tweet from verified individuals or organisations.

Also Read :- Entire verification process is being redesigned right now, Says Twitter Boss Elon Musk

In a tweet earlier this month he subsequently deleted, Musk suggested a raft of changes to the social media giant’s Twitter Blue premium subscription service, including slashing its price, banning advertising and giving an option to pay in the cryptocurrency dogecoin. Twitter’s premium Blue service now costs $2.99 a month.

In another tweet he deleted, Musk said he wants to reduce Twitter’s dependence on advertising for much of its revenue.

Musk, whose net worth is pegged by Forbes at $246 billion, has indicated he will support the banks in marketing the syndicated debt to investors, and that he may unveil more details of his business plan for Twitter then, the sources said.

Musk has also lined a up a new chief executive for Twitter, one of the sources added, declining to reveal the identity of that person. He told Twitter’s chairman Bret Taylor earlier this month that he does not have confidence in the San Francisco-based company’s management. Parag Agrawal, who was named Twitter’s chief executive in November, is expected to remain in his role until the sale of the company to Musk is completed.

Musk has been inundated with offers from potential equity partners to join him in the Twitter deal, and he will decide in the coming weeks if he teams up with someone, one of the sources said. It is unlikely that Musk would partner with a private equity firm given that the deal is not structured as a traditional leveraged buyout, the source added.

Musk disclosed this week that he sold $8.5 billion worth of Tesla shares, a move likely aimed at helping finance his deal for Twitter.

Also Read :- Twitter boss Elon Musk announces Twitter will form content moderation council

The Tesla chief executive also told the banks he will 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 that he has repeated publicly.

The $13 billion Twitter loan is equivalent to seven times Twitter’s 2022 projected earnings before interest, taxes, depreciation and amortization. This was too risky for some banks who decided to participate only in the margin loan, the sources said.

Another reason some banks opted out is because they feared Musk’s unpredictability could result in an exodus of talent from Twitter, harming its business, according to the sources.

Further reading:
For the latest news and reviews, follow us on Facebook, YouTube and Twitter पर फॉलो करे...