(Reuters) – Elon Musk told banks that agreed to assist fund his $44 billion acquisition of Twitter Inc that he may crack down on govt and board pay on the social media firm in a push to slash prices, and would develop new methods to monetize tweets, three individuals accustomed to the matter mentioned.
Musk made the pitch to the lenders as he tried to safe debt for the buyout days after submitting his supply to Twitter on April 14, the sources mentioned. His submission of financial institution commitments on April 21 have been key to Twitter’s board accepting his “greatest and ultimate” supply.
Musk needed to persuade the banks that Twitter produced sufficient money stream to service the debt he sought. In the tip, he clinched $13 billion in loans secured in opposition to Twitter and a $12.5 billion margin mortgage tied to his Tesla inventory. He agreed to pay for the rest of the consideration along with his personal money.
Musk’s pitch to the banks constituted his imaginative and prescient quite than agency commitments, the sources mentioned, and the precise value cuts he will pursue as soon as he owns Twitter stay unclear. The plan he outlined to banks was skinny on element, the sources added.
Musk has tweeted about eliminating the salaries of Twitter’s board administrators, which he mentioned may outcome in about $3 million in value financial savings. Twitter’s stock-based compensation for the 12 months ending Dec. 31, 2021 was $630 million, a 33% enhance from 2020, company filings present.
In his pitch to the banks, Musk additionally pointed to Twitter’s gross margin, which is way decrease than friends reminiscent of Meta Platform Inc’s Facebook and Pinterest, arguing this leaves loads of house to run the corporate in a extra cost-efficient means.
The sources requested anonymity as a result of the matter is confidential. A Musk consultant declined to remark.
Bloomberg News reported earlier on Thursday that Musk particularly talked about job cuts as a part of his pitch to the banks. One of the sources mentioned that Musk will not make selections on job cuts till he assumes possession of the corporate later this 12 months. He went forward with the acquisition with out accessing confidential particulars on the corporate’s monetary efficiency and headcount.
Musk told the banks he additionally plans to develop options to develop enterprise income, together with new methods to make money out of tweets that comprise necessary info or go viral, the sources mentioned.
Ideas he introduced up included charging a charge when a third-party web site desires to cite or embed a tweet from verified people or organizations.
In a tweet earlier this month he subsequently deleted, Musk steered a raft of adjustments to the social media big’s Twitter Blue premium subscription service, together with slashing its worth, banning promoting and giving an choice to pay in the cryptocurrency dogecoin. Twitter’s premium Blue service now prices $2.99 a month.
In one other tweet he deleted, Musk mentioned he desires to decreased Twitter’s dependence on promoting for a lot of its income.
Musk, whose internet price is pegged by Forbes at $246 billion, has indicated he will assist the banks in advertising the syndicated debt to buyers, and that he could unveil extra particulars of his marketing strategy for Twitter then, the sources mentioned.
Musk has additionally lined a up a brand new chief govt for Twitter, one of many sources added, declining to call the id of that particular person.
TOO RISKY FOR SOME BANKS
The Tesla Inc chief govt additionally told the banks he will search moderation insurance policies on the social media platform which might be as free as attainable throughout the authorized constraints of every jurisdiction Twitter operates, the sources mentioned, a place that Musk has repeated publicly.
The $13 billion Twitter mortgage is equal to seven occasions Twitter’s 2022 projected earnings earlier than curiosity, taxes, depreciation and amortization. This was too dangerous for some banks who determined to take part solely in the margin mortgage, the sources mentioned.
Another motive some banks opted out is as a result of they feared Musk’s unpredictability may outcome in an exodus of expertise from Twitter, harming its enterprise, in keeping with the sources.
A Twitter spokesperson didn’t reply to a request for remark.
(Reporting by Krystal Hu in New York and Anirban Sen in Bengaluru; Editing by Greg Roumeliotis and Sam Holmes)
