Musk Warns of a Potential Twitter Chapter. He Would Be the Massive Loser.
BY JODI XU KLEIN | UPDATED NOV 11, 2022 04:00 PM EST
Those who joined him in taking fairness stakes would additionally lose out in an insolvency course of. However he’s by far the most important investor.
If Twitter Inc. recordsdata for chapter, Elon Musk could be the most important loser.
Mr. Musk informed Twitter staff in an all-hands workers assembly Thursday that he wasn’t positive how a lot monetary runway the social-media firm nonetheless has and that “chapter isn’t out of the query.”
Mr. Musk could be flamboyant at occasions, however let’s take his phrases significantly for a second. In case of a Twitter chapter, Mr. Musk—who took over Twitter for $44 billion simply two weeks in the past and put in $27 billion of his personal cash—most certainly would have his funding worn out as fairness holders are the final to be paid when an organization restructures.
Those who joined him and took fairness stakes, like Sequoia Capital, Binance and the Qatar Funding Authority, would face the same consequence. However Mr. Musk is by far the most important investor.
Banks, together with Morgan Stanley and Financial institution of America Corp., that collectively put up $13 billion of their very own cash for debt in Twitter, may additionally see losses. The banks needed to place the debt on their books as they couldn’t promote the bonds quick sufficient to a wider group of traders.
They, nevertheless, have some security nets. Roughly $10 billion of the $13 billion in debt is backed by particular belongings, making certain that they’d be paid again, even when not in full.
This isn’t the primary occasion of Mr. Musk utilizing the B-word with regard to his different corporations.
In a June interview about electric-vehicle maker Tesla Inc., he stated, “Our concern is how can we hold the factories working so we will pay individuals and never go bankrupt.” He was commenting on the supply-chain issues at Tesla’s manufacturing unit in China after Covid-19 lockdowns.
Final 12 months, he additionally raised the specter of chapter 11 safety for SpaceX, his rocket firm, when he tweeted, “If a extreme world recession have been to dry up capital availability/liquidity whereas SpaceX was shedding billions on Starlink & Starship, then chapter, whereas nonetheless unlikely, just isn’t unattainable.”
Mr. Musk’s newest grim assertion about Twitter is constant along with his earlier feedback and actions. He laid off roughly half of Twitter’s 7,500 staff within the first week, blaming an enormous drop in advert income brought on by “activist teams pressuring advertisers” to cancel contracts with the platform. Mr. Musk had additionally tried to stroll away from the acquisition after he stated he was shocked at what number of bots and spam accounts there have been on the platform.
However crying wolf—or on this case, elevating the specter of chapter—can turn out to be a self-fulfilling prophecy if advertisers, customers and staff abandon the corporate as a result of they don’t hear a strategic imaginative and prescient from Twitter’s management. Senior managers are already exiting the corporate since Mr. Musk took the reins, and two extra high-ranking executives simply made public their departures yesterday.
Mr. Musk could find yourself being proper about Twitter submitting for chapter. However in that situation, he’ll lose probably the most.
Supply: Live Mint