After Twitter's takeover, Elon Musk promised banks that he would limit salaries and gain money from tweets.
According to three people familiar with the situation, Elon Musk promised banks that agreed to help fund his $44 billion acquisition of Twitter Inc that he could decrease executive and board pay at the social media business in an effort to minimize expenses, and that he would discover new ways to monetize tweets.
According to the individuals, Musk made the pitch to lenders as he tried to arrange funding for the buyout days after submitting his bid to Twitter on April 14. His bank pledges, which he submitted on April 21, were crucial in Twitter's board accepting his "best and last" bid.
Musk had to persuade the banks that Twitter's cash flow was sufficient to service 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 firm commitments, and the exact cost reduction he will seek once he controls Twitter is
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.
Musk also mentioned Twitter's gross margin, which is substantially lower than peers like Meta Platforms Inc's Facebook and Pinterest, in his pitch to the banks, claiming that this gives lots of room to run the company more cost-effectively.
Because the topic is private, the sources requested anonymity. Musk's spokesperson declined to comment.
According to Bloomberg News, Musk expressly highlighted job cutbacks in his pitch to the banks on Thursday. According to one of the insiders, Musk will not make any decisions about employment layoffs until he takes control of the company later this year. He moved ahead with the purchase despite not having access to private information about the company's finances or headcount.
According to the individuals, Musk told the banks that he plans to build features to boost business revenue, including new ways to monetize tweets that contain significant information or go viral.
Charge a fee when a third-party website wishes to quote or embed a tweet from verified individuals or organizations, for example.
Musk offered a number of modifications to the social media giant's Twitter Blue premium subscription service in a tweet earlier this month that he later deleted, including lowering the price, prohibiting advertising, and allowing users to pay in the cryptocurrency dogecoin. Blue, Twitter's premium service, is now $2.99 per month.
Musk indicated in a deleted post that he wants to minimise Twitter's reliance on advertising for a large portion of its revenue.
According to the sources, Musk, whose net worth is estimated to be $246 billion, has suggested that he will assist the banks in marketing the syndicated loan to investors, and that he may provide further details of his Twitter business plan at that time.
Musk has also appointed a new Twitter CEO, according to one of the individuals, who declined to reveal the person's identify. He told Twitter's chairman, Bret Taylor, earlier this month that he had lost faith in the company's leadership in San Francisco. Parag Agrawal, who took over as Twitter's CEO in November, is anticipated to stay on until Musk completes the purchase of the company.
According to one of the sources, Musk has been besieged with bids from potential equity partners to join him in the Twitter transaction, and he will decide whether to pair up with someone in the coming weeks. Given the size of the acquisition, Musk is unlikely to work with a private equity group.
Musk announced this week that he sold $8.5 billion worth of Tesla stock, presumably to help fund his Twitter acquisition.
According to the sources, the Tesla CEO also told the banks that he will seek moderation practises on the social media platform that are as free as feasible within the legal limits of each jurisdiction in which Twitter operates, a view he has publicly stated.
The $13 billion loan is seven times Twitter's estimated earnings before interest, taxes, depreciation, and amortisation for the year 2022. Some banks decided to participate just in the margin loan because it was too risky, according to the sources.
According to the individuals, some banks opted out because they thought Musk's unpredictability would lead to a talent exodus from Twitter, damaging the company's operations.
A request for comment was not returned by a Twitter spokeswoman.