IT House April 29 news, Reuters quoted three people familiar with the matter as revealing that Tesla CEO Musk told the bank that agreed to fund its acquisition of the US social platform Twitter that he may cut the compensation of the company's executives and board members to sharply cut operating costs and will develop new ways to make money for Twitter.
Sources said Musk tried to finance the acquisition after filing an acquisition offer with Twitter on April 14. The bank promise he submitted on April 21 was key to Twitter's board accepting his "best and final" offer.
So Musk had to convince the bank that Twitter had enough cash flow to pay off his debts. In the end, he secured a $13 billion loan backed by Twitter and a $12.5 billion margin loan pegged to Tesla's stock. He also agreed to pay the remaining difference in cash.
Sources said Musk's pitch to the bank was only his vision rather than a definitive commitment, and it remains unclear what specific cost-cutting measures he will take once he takes down Twitter. The source added that the details of the plan he outlined to the bank were simply insufficient.
Musk said on Twitter last week that if he succeeds in buying Twitter it will cut board member compensation, which he believes could help Twitter save about $3 million in costs. According to the company's filings, Twitter's stock-based compensation was $630 million for the 12 months ended December 31, 2021, a 33 percent increase over 2020.
In his introduction to the bank, Musk also mentioned Twitter's gross margin, which is much lower than its peers like Facebook and Pinterest, a subsidiary of Meta Platforms, arguing that leaves plenty of room for running the company in a more cost-effective way.
Sources asked for anonymity, and Musk's speaking representative declined to comment. A Twitter spokesperson did not respond to a request for comment.
Bloomberg reported on Thursday that Musk specifically mentioned layoffs when borrowing money from banks. One of the sources said Musk would not make a layoff decision until he took over the company later this year. He made the acquisition without any knowledge of Twitter's internal circumstances (without access to confidential details such as the company's financial performance and the number of employees).
Musk also told banks that he is planning to develop more features that will help the business grow in revenue, including new ways to make money from tweets containing important information or explosive spreads, the sources said.
Among the ideas he proposes is to charge a fee when a third-party website wants to quote or embed tweets from verified individuals or organizations. Musk has previously proposed a series of changes to Twitter's Blue paid subscription service, including drastic price cuts, a ban on ads and an option to pay with the cryptocurrency Dogecoin. IT House understands that Twitter's premium Blue service now costs $2.99 per month.
In another tweet he deleted, Musk said he wanted to reduce Twitter's reliance on advertising for most of its revenue.
One of the sources added that Musk was also looking for a new CEO for Twitter, but he declined to reveal the identity of the person. Earlier this month, Musk told Twitter Chairman Bret Taylor that he had no confidence in the company's management.
A source said Musk has received a large number of offers from potential equity partners looking to join him in the Twitter deal, and he will decide in the coming weeks whether to work with people. The source added that given that the deal is not structured like a traditional leveraged buyout, Musk is unlikely to work with a private equity firm.
Musk revealed Thursday that he sold $4 billion worth of Tesla stock, a move that may be intended to fund his acquisition of Twitter.
Musk also told banks that he would seek the highest possible degree of "freedom of speech" on social media when Twitter operations can guarantee jurisdictional restrictions, a position he has just publicly reiterated, the sources said.
Of course, Twitter's $13 billion loan is equivalent to seven times the platform's 2022 profit before interest, taxes, depreciation and amortization. Sources said it was too risky for some banks that decided to participate only in margin loans, and the relevant institutions are considering it.
Another reason some banks have opted out, according to sources, is that they fear Musk's notorious "unpredictability" could lead to the loss of talent from Twitter, hurting their businesses.