Elon Musk’s drastic decision to put off half of Twitter’s workforce on Friday was driven by the corporate’s dire funds — with the now-private company heading in the right direction to lose $700 million in 2023 if he hadn’t slashed costs, The Post has learned.
While the struggling social network posted a modest loss last 12 months, interest payments on the huge trove of debt that Musk used to finance the $44 billion buyout deal will unleash a torrent of red ink on the struggling social network in the approaching 12 months, sources near the situation said.
Specifically, Twitter shall be forced to pay interest expenses on its nearly $13 billion in recent loans that can amount to $1.3 billion per 12 months, one banker near the situation said. That’s greater than Twitter’s typical yearly yield of $1.2 billion in earnings before interest, taxes, depreciation and amortization, or EBITDA — a key measure of profitability utilized by Wall Street.
“The interest expense is higher than the EBITDA,” a banker near the deal said. “That’s why he’s laying people off.”
On top of the punishing interest payments, Twitter typically spent about $600 million on capital expenditures, a banker said. Subtract the interest and capital expenditures from Twitter’s EBITDA and the corporate is $700 million within the red.
It’s a classic nightmare scenario on this planet of leveraged buyouts, sources added — with staff getting stiffed at the same time as top execs at the corporate who pushed for the overpriced deal are angling for large payouts. Those include ex-CEO Parag Agrawal, who was set to bag $38.7 million before Musk fired him “for cause” in an apparent bid to thwart the payout.
To make matters worse, big advertisers have been fleeing the app amid Musk’s antics, which included his posting after which deleting an article detailing an unfounded conspiracy theory in regards to the attack on House Speaker Nancy Pelosi’s husband, Paul.
General Motors, Audi, General Mills and several other other firms have paused Twitter promoting in recent weeks, with executives across the industry preparing contingency plans to reallocate ad dollars away from the location, The Post reported Tuesday.
“Twitter has had a large drop in revenue, attributable to activist groups pressuring advertisers, though nothing has modified with content moderation and we did all the pieces we could to appease the activists,” Musk tweeted Friday. “Extremely tousled! They’re attempting to destroy free speech in America.”
Meanwhile, banks that helped finance Musk’s takeover deal are bracing for heavy losses as they struggle to unload loans.
In late October, Barclays was selling its stake of the $12.7 billion of loans Twitter borrowed to finance the deal at 80 cents on the dollar, one source with direct knowledge said. There have been few takers at that price, which might entail a $2.54 billion loss applied across all of the loans, in line with the source.
A possible buyer of the debt said he was unsure it was even price 60 to 65 cents on the dollar.
Barclays was also willing to lend borrowers money to purchase the Twitter debt, sources said.
As a result of lack of interest, the lead banks which have financed the deal — Morgan Stanley, Bank of America and Barclays — should not broadly syndicating the loan, sources said.
Nonetheless, one lender said buyers could likely still buy a bit of the loan on the discounted 80 cents price.
Representatives for Musk didn’t return calls. Lead Twitter lender Morgan Stanley declined to comment, as did Barclays.
Elon Musk’s drastic decision to put off half of Twitter’s workforce on Friday was driven by the corporate’s dire funds — with the now-private company heading in the right direction to lose $700 million in 2023 if he hadn’t slashed costs, The Post has learned.
While the struggling social network posted a modest loss last 12 months, interest payments on the huge trove of debt that Musk used to finance the $44 billion buyout deal will unleash a torrent of red ink on the struggling social network in the approaching 12 months, sources near the situation said.
Specifically, Twitter shall be forced to pay interest expenses on its nearly $13 billion in recent loans that can amount to $1.3 billion per 12 months, one banker near the situation said. That’s greater than Twitter’s typical yearly yield of $1.2 billion in earnings before interest, taxes, depreciation and amortization, or EBITDA — a key measure of profitability utilized by Wall Street.
“The interest expense is higher than the EBITDA,” a banker near the deal said. “That’s why he’s laying people off.”
On top of the punishing interest payments, Twitter typically spent about $600 million on capital expenditures, a banker said. Subtract the interest and capital expenditures from Twitter’s EBITDA and the corporate is $700 million within the red.
It’s a classic nightmare scenario on this planet of leveraged buyouts, sources added — with staff getting stiffed at the same time as top execs at the corporate who pushed for the overpriced deal are angling for large payouts. Those include ex-CEO Parag Agrawal, who was set to bag $38.7 million before Musk fired him “for cause” in an apparent bid to thwart the payout.
To make matters worse, big advertisers have been fleeing the app amid Musk’s antics, which included his posting after which deleting an article detailing an unfounded conspiracy theory in regards to the attack on House Speaker Nancy Pelosi’s husband, Paul.
General Motors, Audi, General Mills and several other other firms have paused Twitter promoting in recent weeks, with executives across the industry preparing contingency plans to reallocate ad dollars away from the location, The Post reported Tuesday.
“Twitter has had a large drop in revenue, attributable to activist groups pressuring advertisers, though nothing has modified with content moderation and we did all the pieces we could to appease the activists,” Musk tweeted Friday. “Extremely tousled! They’re attempting to destroy free speech in America.”
Meanwhile, banks that helped finance Musk’s takeover deal are bracing for heavy losses as they struggle to unload loans.
In late October, Barclays was selling its stake of the $12.7 billion of loans Twitter borrowed to finance the deal at 80 cents on the dollar, one source with direct knowledge said. There have been few takers at that price, which might entail a $2.54 billion loss applied across all of the loans, in line with the source.
A possible buyer of the debt said he was unsure it was even price 60 to 65 cents on the dollar.
Barclays was also willing to lend borrowers money to purchase the Twitter debt, sources said.
As a result of lack of interest, the lead banks which have financed the deal — Morgan Stanley, Bank of America and Barclays — should not broadly syndicating the loan, sources said.
Nonetheless, one lender said buyers could likely still buy a bit of the loan on the discounted 80 cents price.
Representatives for Musk didn’t return calls. Lead Twitter lender Morgan Stanley declined to comment, as did Barclays.
