Elon Musk takes over Twitter

He paid $44 billion for something that was objectively worth $15 billion at the time he made his offer. ... and valuations of nearly everything (we have been in a bubble) have only come down since then.

He didn't buy the company thinking he could sell it for more than he paid. That greater fool doesn't exist. Even if the Fed hadn't deflated the bubble a little and it was still in full raging force, that buyer wasn't going to be out there. So let's put that aside.

That leaves him having bought it because he delusionally thought he can transform it somehow into something completely different from what it is, and make it worth more than $44 billion. And that doesn't explain his behavior either. Nobody spends that much money on something and then put a sledge hammer to it. You spend that much on something when you think it has value. Otherwise, what was $44 billion supposedly buying him?

It is exactly what it looks like. He highly leveraged himself personally to complete a dumbass deal he got himself stuck making because he was being an impetuous ass. He has (not looking at exact numbers, so working from memory) $27 billion of his own money flapping in the wind right now, and worse, he borrowed another $13 billion. That comes with a nut of more than $1 billion in interest due at the end of a year, and the loans are collateralized with his Tesla stock, so he could lose that money too if he defaults. Twitter's operations generated only $630 million in cash last year. So the company he bought as it existed, didn't even come close to generating enough cash to service the debt he took on, let alone do much else.

He bit off more than he could chew. He has done that a lot as a businessman, but I can point to countless times he has been bailed out. It would be a whole other post, but the short of it is that the environment is completely different from the one he has been able to game with bullshit and bubblegum. The tide is going out right now (not just for him; for lots of people) and he is swimming naked. So it's not happening, he is realizing it, and what you are seeing is a man in a panic trying to fix an untenable situation.

 

I'd love to see what is happening with the company's ad revenue right now. In real time. When he bought the company, it was 90 percent of the company's revenue. Even if the company loses money, it was the only lifeline keeping it from going bust more quickly.

The workforce chaos is interesting. He is in so over his head. But, honestly, if he has any kind of actual vision, he can go out and buy the people to execute it. The skills he needs are not that unique.

The drop off in advertising, on the other hand, might be creating a big immediate problem. Companies have been cutting, and ad budgets are one of the first cuts. So he might have been facing a tough environment anyhow. But his shenanigans and the chaos have to be scaring off a lot of advertisers who might otherwise still be there, but have left. Especially when you hear reports that he has jumped on calls with media buyers and has presented no vision or plan and has come off like a douche.

In his pitch to investors when he was trying to raise money for the purchase, his plan was to 1) magically increase revenue by more than 5 fold, but at the same time 2) cut the reliance on ad revenue to less than 50 percent of sales. There it gets a bit vague, but he was talking about subscriptions, data licensing, paid direct messages, processing payments (and there he has veered into bullshit about how it is going to be an "everything app").

Even giving him the benefit of the doubt, he needs to replace close to $5 billion of revenue immediately if he is going to drive all of the advertisers away. None of that pie-in-the-sky stuff is even close to being realized. And he needs to do it with a clock ticking because massive interest payments are looming. He can't BS his way out of this one.