Elon Musk attends the opening ceremony of the new Tesla Gigafactory for electric cars in Grunheide, Germany, March 22, 2022. Patrick Pleul / Swimming pool via REUTERS / File photo
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April 29 (Reuters) – Elon Musk told banks that agreed to help fund his $ 44 billion acquisition of Twitter Inc (TWTR.N) that he could impose measures against the remuneration of CEOs and the company’s board. on social media in an attempt to cut costs, and will develop new ways to generate revenue from tweets, said three people familiar with the matter.
Musk made an offer to creditors as he tried to secure a buyout debt days after sending his offer on Twitter on April 14, sources said. His presentation of bank commitments on April 21 was key to the acceptance of the “best and latest” offer on Twitter.
Musk had to convince the banks that Twitter was producing enough cash to service the debt it was looking for. He eventually received a $ 13 billion loan secured against Twitter and a $ 12.5 billion margin loan tied to his shares in Tesla Inc (TSLA.O). He agreed to pay the rest of the remuneration with his own money.
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Musk’s reference to the banks was his vision, not a firm commitment, sources said, and the exact cost cuts he will make once he owns Twitter remain unclear. The plan he outlined to the banks is subtle in detail, sources added.
Musk tweeted to cut the salaries of directors on Twitter, which he said could save about $ 3 million. Twitter’s stock-based compensation for the 12 months ended December 31, 2021 is $ 630 million, an increase of 33% compared to 2020, corporate documents show.
Speaking to banks, Musk also cited Twitter’s gross profit, which is much lower than Facebook’s and Meta Platforms Inc (FB.O) and Pinterest (PINS.N), saying it leaves a lot of room for management. the company in a more cost-effective way.
Sources requested anonymity as the matter is confidential. A Musk spokesman declined to comment.
Bloomberg News reported earlier Thursday that Musk explicitly mentioned job cuts as part of his presentation to banks. One source said Musk would not decide on job cuts until he took ownership of the company later this year. He continued with the acquisition without having access to confidential details about the company’s financial performance and number of employees.
Musk told banks 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, sources said.
The ideas he came up with 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 number of changes to the social media giant’s Twitter subscription premium service, including reducing its price, banning advertising and giving the 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 wanted to reduce Twitter’s dependence on advertising for much of its revenue.
Musk, whose net worth is set by Forbes at $ 246 billion, said he would support banks in marketing syndicated investor debt and that he could then reveal more details of his business plan for Twitter, sources said.
Musk has also appointed a new CEO for Twitter, one source added, declining to name the person. He told Twitter chairman Brett Taylor earlier this month that he did not trust the management of the San Francisco-based company. Parag Agraval, who was appointed CEO of Twitter in November, is expected to remain in office until the sale of Musk’s company is completed.
Musk is flooded with offers from potential shareholders to join him in the Twitter deal, and in the coming weeks he will decide whether to partner with someone, one source said. Musk is unlikely to partner with a private investment company, given that the deal is not structured as a traditional leverage buyout, the source added.
Musk revealed on Thursday that he has sold $ 4 billion worth of shares in Tesla, which is likely to help fund his Twitter deal. Read more
Tesla’s chief executive also told banks he would seek policies to moderate the social media platform as free as possible within the legal limits of each jurisdiction in which Twitter operates, sources said. has repeated publicly.
The $ 13 billion Twitter loan is equivalent to seven times Twitter’s projected profit for 2022 before interest, taxes, depreciation and amortization. This was too risky for some banks, which decided to participate only in the margin loan, sources said.
Another reason for some banks to give up is that they fear that Musk’s unpredictability could lead to the emigration of talent from Twitter, which could harm his business, according to sources.
A Twitter spokesman did not respond to a request for comment.
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Report by Crystal Hu in New York and Anirban Sen in Bengaluru Edited by Greg Rumeliotis and Sam Holmes
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