Twitter the company takes out a huge loan to pay the current shareholders a fortune (which is decided by those same shareholders, no conflict of interest there at all). But who the fuck would give them a loan like that (like you say, just to have Musk at the helm)?
How do you think that debt ends up getting paid off? It'll be close to $1 billion every year just to service that debt.
Given that:
* Twitter has only ever made a profit in 2018 and 2019
* That the profits it made in those two years were $1.2bn and $1.4bn respectively (only just enough to service this new debt)
* That for 2020 and 2021 other tech companies were comparatively minting it, but Twitter burned ~$1.3bn
* The world is generally in the early phases of what is likely to a deep recession, with ad spend and consumer spending already well down
It feels like a bit of an interesting purchase, to say the least.
It should be noted that the plan to charge users $8 per month for a blue verification badge wouldn't even service the debt if 25 times more people bought it than currently have it for free.
This article explains: (a) how leveraged buyouts work, (b) how Musk's acquisition is different from a regular LBO, and (c) what debt Twitter now has due to the deal.
https://www.washingtonpost.com/business/elon-musks-twitter-d...
Edit: I must say that even after I read it I have trouble understanding how any of that happens except through well connected people moving money around to their own benefit.
The banks are on the hook, but it’s not really the banks because it’s not their money they are lending out.
So I really understand them.
And I agree with you. "Leverage" means multiplying both risk and reward. Given a system where losses are socialized, and wins are privatized, it makes complete sense to do LBOs as much as possible - the people with money win, and everyone else loses.
A syndicate of banks, including Morgan Stanley, Bank of America, Barclays, Mitsubishi UFJ Financial Group, BNP Paribas, Mizuho Financial Group and Societe Generale.
https://www.cnbc.com/2022/10/05/banks-financing-musks-twitte...
Banks usually do not care that much about clients or user experience. They look at a businesses financials and check whether it can take the extra interest payments. Apparently, Musk convinced them that with some job cuts, Twitter would be able to make the interest payments. We will see how this works out. There may be an advertiser exodus happening already and I do not think either the banks or Musk planned for that.
I find that train of thought very unconvincing.
Basically it seems like some people are doing some mental gymnastics to justify disliking or boycotting Twitter because Elon bought it and doesn’t seem to be going along with the program.