Merged Musk buys Twitter!/ Elon Musk puts Twitter deal on hold....

[3point14]

He is the sole owner of the company. There are no shares. There are no shareholders.

If he were a good businessman making a thoughtful purchase (neither is true), then he would have hit the ground running with a well-researched plan for how to turn the company profitable. Instead, he's asking randos on Twitter whether or not his ideas are good.

The company has been losing money for three years. Eventually, banks will stop letting Twitter float cash and then cuts will have to be made. There are still bills to pay, after all. Musk is not "personally" responsible for that in the sense that he will have to make up the difference out of his own pocket (though he is free to do so if he wishes). The worst that could happen to him is that the entire corp goes belly-up and his $44b purchase is worthless.

I'm not a business expert, so someone else feel free to correct any mistakes I made.

Private companies still have shares of stock. There is also a report upthread that he has 19 equity investors. Equity investment usually means they bought shares.

Thank you, both.

 

[angrysoba]

He is the sole owner of the company. There are no shares. There are no shareholders.

If he were a good businessman making a thoughtful purchase (neither is true), then he would have hit the ground running with a well-researched plan for how to turn the company profitable. Instead, he's asking randos on Twitter whether or not his ideas are good.

The company has been losing money for three years. Eventually, banks will stop letting Twitter float cash and then cuts will have to be made. There are still bills to pay, after all. Musk is not "personally" responsible for that in the sense that he will have to make up the difference out of his own pocket (though he is free to do so if he wishes). The worst that could happen to him is that the entire corp goes belly-up and his $44b purchase is worthless.

I'm not a business expert, so someone else feel free to correct any mistakes I made.

Are you an Emperor? No? Well, have you ever considered the possibility that the Emperor knows exactly what he's doing and is wearing the finest clothes in the whole of the Empire?*


*variations on this theme is one of the most popular rebuttals to criticism and they are being made entirely unironically often by culture war figures or by posters who are apparently barely literate. Unfortunately they will be first in line for the white-on-a-blue-background check marks.

 

[HansMustermann]

I honestly do not think he has got a plan at all. I don't think he ever really wanted to buy it and I don't think he knows what to do with it now that he has bought it. In fact, right up to the moment his lawyers finally managed to penetrate his skull with reality, he probably thought he wasn't buying Twitter.

Twitter made an annual loss of $221 million in 2021. If every single verified account (400,000 approximately) bought the subscription, it would add £40 million to the bottom line. That's quite a bit smaller than £221 million. Then you have to remember that Twitter now also has to service Elon's loan to buy it. Interest payments on that are reportedly £1 billion. This $8 thing is just chickenfeed. He's got to do something far more radical. Laying off a sizeable percentage of the staff is probably his only short term option.

Well, he COULD be thinking that he'll save that much by stopping paying all those moderators or whatnot. Twitter burns through about 3.7 billion a year as costs, and only about a third of that is actually related to running its data centres. You only need to reduce the other expenses by 10% to break even.

Almost as much as the data servers (which includes the admins for them and all) are the R&D costs, and honestly I'm not even sure WTH are they programming for that much money. We're talking each year over 10 times the budget of Fallout 4 or 4-5 times the budget of GTA 5 or COD MW2 or SWTOR even after adjusting for inflation. Per year. And those games also include the artists and voice actors and whatnot in the price. WTH is Twitter even programming for that kind of money.

So his starting to fire programmers may not entirely be madness.

Then comes a similarly sized chunk in marketing, but ok, I suppose you need that.

And then come many hundreds of millions per year in administrative costs. In fact the general and administrative expenses are what rose the fastest lately on Twitter. They rose by more than half in a single quarter at the end of 2021 for example.


That said, as I've said before, yeah, it also wouldn't surprise me at all if he had no plan and didn't think he was even gonna buy it until the lawyers dawned some reality on him.

 

[Ziggurat]

He is the sole owner of the company. There are no shares. There are no shareholders.

No, he isn't the sole owner, I believe he's only the majority owner. Yes, there are shareholders. A company doesn't have to be publicly traded in order to have multiple owners. There's already been reference in this thread to a Saudi prince who's still a minority owner. And multiple owners requires shares. Hell, I believe a company can have shares even if it's sole ownership.

If he were a good businessman making a thoughtful purchase (neither is true), then he would have hit the ground running with a well-researched plan for how to turn the company profitable. Instead, he's asking randos on Twitter whether or not his ideas are good.

I'm not sure that's anything other than a publicity stunt to drum up interest in Twitter. Which may be worth doing regardless of what plans you already have. If nothing else, it's basically free market research. Now, does he have plans already? Don't know. But I do know that him asking isn't a reliable sign of anything.

The company has been losing money for three years. Eventually, banks will stop letting Twitter float cash and then cuts will have to be made.

Oh, I expect cuts will come a lot sooner than "eventually".

 

[angrysoba]

Oh, I expect cuts will come a lot sooner than "eventually".

Yep. Tomorrow, apparently.

Elon Musk plans to eliminate about 3,700 jobs at Twitter Inc., or half of the social media company’s workforce, in a bid to drive down costs following his $44 billion acquisition, according to people with knowledge of the matter.

Twitter’s new owner aims to inform affected staffers Friday, said the people, who requested anonymity discussing non-public plans. Musk also intends to reverse the company’s existing work-from-anywhere policy, asking remaining employees to report to offices -- though some exceptions could be made, the people said.

Link

 

[I Am The Scum]

Private companies still have shares of stock. There is also a report upthread that he has 19 equity investors. Equity investment usually means they bought shares.

I'm a bit ignorant on this point because every other time you here about shares of a company, it means "stock market thingies."

In other publicly traded companies, CEOs have a legal obligation to maximize shareholder returns. Does that still apply to private companies?

 

[angrysoba]

Looks like some people are not optimistic...

 

[HansMustermann]

Far as I know, not only they do generally, but there are even laws protecting minority shareholders explicitly.

As to the other point, really, it works just like stock in public companies, except:

A. only institutions and accredited investors may freely trade its stock. You can still own stock (e.g., from before it went private, or from stock options, etc) but trading it may involve extra hurdles like finding an accredited broker to do it for you, and a case of caveat emptor. Sometimes extra rules too.

B. it's not just listed anywhere. To buy or sell stock, you have to find a seller or buyer yourself and privately agree on the price. Like if I wanted some shares in Twitter, I might privately contact the Saudi prince and see how much does he want for his. Some broker may help you to find one, but basically it's still a private transaction between the two of you.

C. they don't have to abide by the SEC transparency rules. Most notably they don't have to publish their financials data. Which is really the reason for A.


Incidentally B also makes it harder to say that the CEO actually acted against your interests. Like, in which way? You can't use the shares dropping as a metric, because there is no listed price. It's all up to who you can sell it to, and how much they're willing to pay.

 

[lobosrul5]

He is the sole owner of the company. There are no shares. There are no shareholders.

If he were a good businessman making a thoughtful purchase (neither is true), then he would have hit the ground running with a well-researched plan for how to turn the company profitable. Instead, he's asking randos on Twitter whether or not his ideas are good.

The company has been losing money for three years. Eventually, banks will stop letting Twitter float cash and then cuts will have to be made. There are still bills to pay, after all. Musk is not "personally" responsible for that in the sense that he will have to make up the difference out of his own pocket (though he is free to do so if he wishes). The worst that could happen to him is that the entire corp goes belly-up and his $44b purchase is worthless.

I'm not a business expert, so someone else feel free to correct any mistakes I made.

No he isn't. And privately held corporations can have shares, and they can be sold.

https://www.forbes.com/sites/mattdu...s-second-largest-shareholder/?sh=7c55dbee523a

 

[lobosrul5]

I'm a bit ignorant on this point because every other time you here about shares of a company, it means "stock market thingies."

A publicly traded company means those shares are traded on an exchange. And that, with some exceptions, anyone can buy and sell shares. Privately held corps may have rules such as any selling must be approved by a majority of existing shareholders etc. But people do buy into privately held companies... what do you think private equity firms do?

In other publicly traded companies, CEOs have a legal obligation to maximize shareholder returns. Does that still apply to private companies?

No they don't.
https://www.nytimes.com/roomfordeba...rs/corporations-dont-have-to-maximize-profits

Exceptions being with a pending merger or acquisition.

 

[RecoveringYuppy]

In other publicly traded companies, CEOs have a legal obligation to maximize shareholder returns. Does that still apply to private companies?

To add to what lobusrol5 just said: That actual requirement for publicly traded companies is not quite what you think, see the link lobusrol5 provided for details.

 

[Robin]

I sense a kind of Jekyll and Hyde battle in Musk's soul between the canny business man and the free speech demagogue when it comes to the matter of advertisers who are not happy with the prospect of their advertisements appearing next to white supremacist ravings.

 

[HansMustermann]

There might be one, or there might not be any battle. Often when you hear people saying they do X to achieve Y, actually they want Z, X is what would get them Z, and Y is some more palatable excuse they can tell the public. Like, based on a real example, I could tell you that the application needs a gigabyte of graphics (the X) and justify it in the name of GUI usability (the Y) but actually just want to give some corporate money to my brother-in-laws graphics design company (the Z.) Essentially the Y is just something where I worked backwards from the "solution" I want, to what problem I can say publicly that justifies it. Generally, when you wonder how they'll reconcile doing X with the stated goal Y, especially given other factors and actions that are relevant there, you might want to suspect that Y isn't the actual goal.

Anyway, in Elon's case he COULD actually be a free speech absolutist, or he COULD just have figured that out as a more palatable excuse to fire the moderators and save some money. Better PR than just saying "we'll turn it into a flippin' wasteland for a buck."

We'll probably never know which one it really is, in the depth of his own head, but he must have promised SOMETHING to the people who gave him their money for that purchase. Like, that they'll get a return on investment. I kinda doubt that bankers are the kind of ideological crusaders who'll throw away tens of billions just to make some ideological point. (Of course, I can't actually support that, so maybe they are, after all)

 

[lobosrul5]

I sense a kind of Jekyll and Hyde battle in Musk's soul between the canny business man and the free speech demagogue when it comes to the matter of advertisers who are not happy with the prospect of their advertisements appearing next to white supremacist ravings.

Not just advertisers but their content creators. For example, would Disney/Marvel and the cast, thru publicists, still tweet about the upcoming Black Panther sequel if 5% of the comments are white supremist ravings?

Its a double edged sword his facing.

 

[lobosrul5]

There might be one, or there might not be any battle. Often when you hear people saying they do X to achieve Y, actually they want Z, X is what would get them Z, and Y is some more palatable excuse they can tell the public. Like, based on a real example, I could tell you that the application needs a gigabyte of graphics (the X) and justify it in the name of GUI usability (the Y) but actually just want to give some corporate money to my brother-in-laws graphics design company (the Z.) Essentially the Y is just something where I worked backwards from the "solution" I want, to what problem I can say publicly that justifies it. Generally, when you wonder how they'll reconcile X with the stated goal Y, especially given other factors and actions that are relevant there, you might want to suspect that Y isn't the actual goal.

Anyway, in Elon's case he COULD actually be a free speech absolutist, or he COULD just have figured that out as a more palatable excuse to fire the moderators and save some money. Better PR than just saying "we'll turn it into a flippin' wasteland for a buck."

We'll probably never know which one it really is, in the depth of his own head, but he must have promised SOMETHING to the people who gave him their money for that purchase. Like, that they'll get a return on investment. I kinda doubt that bankers are the kind of ideological crusaders who'll throw away tens of billions just to make some ideological point. (Of course, I can't actually support that, so maybe they are, after all)

As far as the bankers, he's promised to pay back a loan with interest on the agreed upon terms with Twitter as the collateral. So if he fails, Twitter will largely be owned by a bank, or banks.

 

[HansMustermann]

As far as the bankers, he's promised to pay back a loan with interest in the agreed upon terms with Twitter as the collateral. So if he fails, Twitter will largely be owned by a bank, or banks.

Yes, but that relies on Twitter actually being worth buying for that kind of money. Because essentially if it comes to that, then that bank effectively just bought Twitter for that money. Same as when you mortgage the house or anything else. The bank has to believe that the house is worth whatever remains from that debt, or they don't give you that money. So he had to tell them that he has a plan to actually make it profitable, not just that they can sell the servers for a fraction of that after it goes bankrupt.

 

[lobosrul5]

Yes, but that relies on Twitter actually being worth buying for that kind of money. Because essentially if it comes to that, then that bank effectively just bought Twitter for that money. Same as when you mortgage the house or anything else. The bank has to believe that the house is worth whatever remains from that debt, or they don't give you that money. So he had to tell them that he has a plan to actually make it profitable, not just that they can sell the servers for a fraction of that after it goes bankrupt.

This is not really the same as a home mortgage, thats very much rules based. Credit history + provable income + an appraisal + 20% down (or mortgage insurance). I promise this deal was approved at the executive level. And a LOT of research and due diligence was put into it. Theres even a chance that they want Musk to default because they believe with proper management that they can make Twitter profitable.

 

[HansMustermann]

This is not really the same as a home mortgage, thats very much rules based. Credit history + provable income + an appraisal + 20% down (or mortgage insurance). I promise this deal was approved at the executive level. And a LOT of research and due diligence was put into it. Theres even a chance that they want Musk to default because they believe with proper management that they can make Twitter profitable.

Well, whether that's done by them or Elon, still seems to me like they weren't doing it because Elon promised free speech. Is all I'm saying.

 

[dudalb]

Musk is following the pointy-haired bosses logic: if you cut enough costs in your company, it will make money even if it has no income.

Problem is that never works for very long.

 

[dudalb]

No he isn't. And privately held corporations can have shares, and they can be sold.

https://www.forbes.com/sites/mattdu...s-second-largest-shareholder/?sh=7c55dbee523a

The difference is that stockholders in a privately held company have no voting righs and no voice in managment the way they do in a Publically held company.