One of Elon Musk’s most pressing reasons for slashing 50% of the Twitter workforce Friday is $1.3 billion in interest expenses that will be due on the nearly $13 billion financing he used to acquire the company.
This is according to a report by the New York Post, citing one banker and sources familiar with the financing for the $44 billion deal.
This surpasses Twitter’s typical $1.2 billion in earnings before interest, taxes, depreciation and amortization, or EBITDA, a common measure of profitability on Wall Street.
If Musk had not made the cuts, the now-private company would have been on track to lose $700 million in 2023 — basing the figure on the interest and Twitter’s annual $600 million in capital expenditures.
The end result of Musk’s $44 billion deal is common in leveraged buyouts — with top executives in the deal being generously rewarded and everyday workers getting squeezed.
In fact, three top Twitter executives who billionaire Musk fired after acquiring the platform Thursday, will collect $100 million in severance and equity payouts, according to Bloomberg. Chief Executive Officer Parag Agrawal — who has been in the position for less than a year, and Twitter for nearly a decade — is estimated to get roughly $50 million. Chief Financial Officer Ned Segal and legal chief Vijaya Gadde, will receive, respectively, $37 million and $17 million.
Making matters thornier for Musk is the fact that big advertisers are fleeing Twitter, or putting their advertising on pause.
General Motors, Audi, General Mills and a number of other big corporations have suspended their Twitter ads.
In response, sharp-tongued Musk tweeted Friday, “Twitter has had a massive drop in revenue, due to activist groups pressuring advertisers, even though nothing has changed with content moderation and we did everything we could to appease the activists.
“Extremely messed up! They’re trying to destroy free speech in America,” Musk added.
According to one source, Barclays was selling its stake of the $12.7 billion in loans in October at 80 cents on the dollar. At this price, the investment banks backing the deal, which also include Morgan Stanley and Bank of America, are looking at a collective $2.54 billion loss on their loans.
One potential buyer did not even know if the financing was worth 60 to 65 cents on the dollar.
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