Musk instructed banks he’ll rein in Twitter pay, earn cash from tweets -sources

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April 29 (Reuters) – Elon Musk instructed banks that agreed to assist fund his $44 billion acquisition of Twitter Inc (TWTR.N) 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 folks aware of the matter stated.

Musk made the pitch to the lenders as he tried to safe debt for the buyout days after submitting his provide to Twitter on April 14, the sources stated. His submission of financial institution commitments on April 21 have been key to Twitter’s board accepting his “greatest and remaining” provide.

Musk needed to persuade the banks that Twitter produced sufficient money stream to service the debt he sought. In the long run, he clinched $13 billion in loans secured in opposition to Twitter and a $12.5 billion margin mortgage tied to his Tesla Inc (TSLA.O) inventory. He agreed to pay for the rest of the consideration together with his personal money.

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Musk’s pitch to the banks constituted his imaginative and prescient slightly than agency commitments, the sources stated, and the precise value cuts he’ll 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 stated may end 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 far decrease than friends reminiscent of Meta Platforms Inc’s (FB.O) Fb and Pinterest (PINS.N), 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 Information reported earlier on Thursday that Musk particularly talked about job cuts as a part of his pitch to the banks. One of many sources stated that Musk is not going to make selections on job cuts till he assumes possession of the corporate later this yr. He went forward with the acquisition with out accessing confidential particulars on the corporate’s monetary efficiency and headcount.

Musk instructed the banks he additionally plans to develop options to develop enterprise income, together with new methods to earn cash out of tweets that comprise vital info or go viral, the sources stated.

Concepts he introduced up included charging a price when a third-party web site needs to cite or embed a tweet from verified people or organizations.

In a tweet earlier this month he subsequently deleted, Musk instructed a raft of modifications to the social media big’s Twitter Blue premium subscription service, together with slashing its value, banning promoting and giving an choice to pay within the cryptocurrency dogecoin. Twitter’s premium Blue service now prices $2.99 a month.

In one other tweet he deleted, Musk stated he needs to cut back 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’ll assist the banks in advertising the syndicated debt to traders, and that he could unveil extra particulars of his marketing strategy for Twitter then, the sources stated.

Musk has additionally lined a up a brand new chief govt for Twitter, one of many sources added, declining to disclose the id of that particular person. He instructed Twitter’s chairman Bret Taylor earlier this month that he doesn’t believe within the San Francisco-based firm’s administration. Parag Agrawal, who was named Twitter’s chief govt in November, is anticipated to stay in his position till the sale of the corporate to Musk is accomplished.

Musk has been inundated with provides from potential fairness companions to affix him within the Twitter deal, and he’ll determine within the coming weeks if he groups up with somebody, one of many sources stated. It’s unlikely that Musk would companion with a non-public fairness agency on condition that the deal shouldn’t be structured as a standard leveraged buyout, the supply added.

Musk disclosed this week that he bought $8.5 billion price of Tesla shares, a transfer doubtless aimed toward serving to finance his deal for Twitter. [nL2N2WR04A]

The Tesla chief govt additionally instructed the banks he’ll search moderation insurance policies on the social media platform which might be as free as doable throughout the authorized constraints of every jurisdiction Twitter operates, the sources stated, a place that he 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 within the margin mortgage, the sources stated.

One more reason some banks opted out is as a result of they feared Musk’s unpredictability may end 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.

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Reporting by Krystal Hu in New York and Anirban Sen in Bengaluru
Modifying by Greg Roumeliotis and Sam Holmes

Our Requirements: The Thomson Reuters Belief Rules.

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