this post was submitted on 26 Jul 2023
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Twitter was profitable before Musk took over.
The purchase itself saddled Twitter with $13 billion in debt. Musk paid $26bn, other investors (including the Saudi prince) together paid $5bn, and the remaining $13bn was a loan Twitter took out to buy itself on their behalf.
The new owners only paid tax on the $31bn they paid, not the $44bn that was paid to shareholders. (Here's something I'm not sure about: Musk was one of the largest shareholders. Is the $44bn the total value of all shares - does that include Musk's shares? Did he basically buy shares from himself?)
The interest on that $13bn was comparible to Twitter's revenue, before Musk started fucking around. Twitter could not afford that debt.
The buyout itself was what killed Twitter. Everything since then has been nothing but a clown show to distract from the fact that was the original intention.
Thank you. I hate it when people say Twitter wasn't profitable. It was profitable. It just wasn't an infinite money printing machine like people (investors) wanted. Twitter didn't need investor money or loans to pay all its bills unlike say Tumblr.
Twitter was the victim of the same financial BS as Toysrus.
I've had the impression for a while that Twitter upper management wanted monthly active users on the level of Facebook, Tiktok and other social media. To enrich themselves by way of ad revenue, rather than to create opportunities and experiences for the platform and its users. Then when it became apparent that such a potential opportunity had come and gone (if it was ever there in the first place), they did what was in their minds the next-best thing: They cashed out while they could still find a buyer. Elon's idiotically freewheeling but nevertheless binding offer was basically their winning lottery ticket, so they held his feet to the fire instead of treating it like the thoughtless shitpost it was.
Wait, that sounds like a leveraged buyout. I overlooked that detail in the news. It changes everything.
I know that some investment firms use leveraged buyouts to drain every bit of money from a company before they chop it up, sell the good bits and let the rest go bankrupt due to the massive debts left in the carcass of the old company. It's so scummy I wonder why it's not illegal.
It is a leveraged buyout, yes.
I'm not saying it wasn't profitable. It's a hell of an achievement that it was.
Just that they took on a lot of investment capital and it wasn't the kind of return that investors were expecting.
Ultimately, the efficacy of social media advertising on the whole is in the decline. The number and types of companies that used to advertise and run their business on Facebook is so different today than it was five years ago, and business are seeing far less return for their budget.
Twitter was riding a knife's edge (particularly during COVID) and would have to really scramble to stay in the red in the future.
That's truly some Hollywood-accounting-style bullshit. I couldn't even imagine the paradoxical mathematics it took to make that happen.
It would be like me paying you to buy a candy bar from me.