Musk told banks he would limit payments on Twitter and make money from tweets, sources say


Elon Musk attends the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS/File Photo

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April 28 (Reuters) – Elon Musk has told banks that agreed to help fund his $44 billion acquisition of Twitter Inc (TWTR.N) that he may crack down on executive and board member pay. the social media company’s board in a bid to cut costs, and would develop new ways to monetize tweets, three people familiar with the matter said.

Musk pitched his offer to lenders as he tried to secure debt for the buyout days after he submitted his offer to Twitter on April 14, the sources said. His submission of bank pledges on April 21 was key to getting Twitter’s board to accept his “best and last” offer.

Musk had to convince the banks that Twitter was producing enough cash to pay off the debt he was seeking. Ultimately, he landed $13 billion in Twitter-backed loans and a $12.5 billion margin loan tied to his Tesla stock (TSLA.O). He agreed to pay the rest of the consideration with his own money.

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Musk’s pitch to the banks was his vision rather than firm commitments, the sources said, and the exact cost-cutting he will pursue once he owns Twitter remains unclear. The plan he presented to the banks lacked details, the sources added.

Musk tweeted about eliminating salaries for administrators from Twitter’s board, which he said could result in cost savings of about $3 million. Twitter’s stock-based compensation for the 12 months ending Dec. 31, 2021 was $630 million, a 33% increase from 2020, according to company filings.

In his speech to the banks, Musk also pointed to Twitter’s gross margin, which is well below peers such as Meta Platform Inc’s (FB.O) Facebook and Pinterest (PINS.N), arguing that leaves a lot space to run the business. in a more profitable way.

The sources requested anonymity as the matter is confidential. A representative for Musk declined to comment.

Bloomberg News reported earlier Thursday that Musk specifically mentioned the job cuts as part of his speech to the banks. One of the sources said Musk would not make a decision on the job cuts until he takes ownership of the company later this year. He made the acquisition without access to confidential information about the company’s financial performance and workforce.

Musk told the banks he also plans to develop features to boost business revenue, including new ways to make money from tweets that contain important information or go viral, the sources said.

Some of the ideas he mentioned include charging a fee when a third-party website wants to quote or embed a tweet from verified individuals or organizations.

In a tweet earlier this month, which he later deleted, Musk suggested a series of changes to the social media giant’s premium subscription service Twitter Blue, including cutting its price, banning advertising and offering dogecoin cryptocurrency payment option. Twitter’s premium blue service now costs $2.99 ​​per month.

In another tweet that he deleted, Musk said he wanted to reduce Twitter’s reliance on advertising for a large chunk of its revenue.

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

Musk has also appointed a new chief executive for Twitter, one of the sources added, declining to name that person.

The chief executive of Tesla Inc also told banks it would seek moderation policies on the social media platform that are as free as possible within the legal limits of each jurisdiction Twitter operates, have the sources said, a position Musk repeated. publicly.

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

Another reason some banks pulled out was because they feared Musk’s unpredictability could lead to an exodus of talent from Twitter, hurting its business, the sources said.

A Twitter spokesperson did not respond to a request for comment.

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Reporting by Krystal Hu in New York and Anirban Sen in Bengaluru Editing by Greg Roumeliotis and Sam Holmes

Our standards: The Thomson Reuters Trust Principles.


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