Twitter is Dead
So, not to concern you all, but Twitter is dead. Or at least the Twitter you know is dead. It’s not because Elon bought it. Billionaires buy things all the time. No biggie. It’s HOW Elon is buying it. He is loading it up with debt.
Twitter did about $5B in revenue in 2021 and lost $.22B. They were last profitable pre-pandemic. But even then they cleared about $1B in profit. Their debt service has hovered around $50M a year. IMHO, that’s pretty manageable.
But in this new deal, Elon is gonna buy them for 44ish Billion and they have to pay pay $845m a year in debt service.
845,000,000 American Dollars. A year.
How do you grow a company when you gotta pay $845m (17x more than average) every year? How do you “fix the problems” you claim are there? How do you hire the best and the brightest?
You don’t!
You can’t!
You gotta make that nut and pay that debt!
Y’all, we’re watching Toys R Us 2.0.
Remember Toys R Us?
People who don’t know better claim that Toys R Us was crushed by Amazon…
Nope. They were crushed by debt service in a similar deal like this one. They did $12B in sales the year before but had to pay $400M in debt a year.
Think about this. Toys R us did $12B in revenue and got taken down by $400m in debt. Twitter does $5b in revenue and has to pay $800M in debt.
So how is Twitter gonna make these payments? Well, maybe they’ll start charging to tweet? Or maybe they’ll charge to read tweets? Or maybe they’ll sell disinformation services? Or maybe they’ll get into the extortion business like yelp? I dunno. But as soon as that deal is done…
The Twitter you know is dead. Sorry. It was a fun ride. We made some friends. We told some jokes. But the debt man gets paid y’all. The debt man always gets his pound of flesh. Elon can’t hide this Tesla in his neighbor’s garage to avoid the repo man.
TLDR: Rent due.