I don't think it will fail on a technical level. As this article says lots of engineering has gone in to make the thing pretty resilient. I would also say that there are still enough engineers who work there who can figure out what's gone wrong and "turn it on and off again" or w/e makes it splutter back to life.
In terms of changes to the Platform ditto. It's not difficult to make these changes that a team of 100's of devs who are not 100% aware of what's there already can't figure it out. I've taken over systems that I knew very little of and were pretty big (not as big as twitter) and I managed for years to make changes without drastically breaking stuff. In any event if they do break stuff they will be able to fix what they have broken.
No, the real failure here is the massive debt burden and the fact that there is no way that twitter can ever service that amount of debt. Note that before EM took over it was ticking along with a relatively small loss. If they had cut headcount by maybe 10% they would have been break even easily. There is no way that's possible with $4million of interest per day. They have to radically change the way they monetise the platform to get to that level. I don't think they will ever get there and Musk will sell off at a bargain basement price at some point in the future to pay back the debt.
The fact that he was able to "buy" Twitter and yet transfer a significant amount of debt to the company rather than being liable himself is just another sign of how different "rich people accounting" is. He will walk away from this with a bit less theoretical money but no material impact to his life, while thousands of people are having their lives up-ended. How long are we going to keep letting shit like this happen?
Yeah I love it. I would like to "buy" a multi-million dollar mansion in the Bahamas with big bank money, but have the bank only encumber the property itself, and I get to live in it and pay service staff for my luxury, maybe the odd AirBnB letting to maintain the occasional pretense of repayment, up until the time 'it' can't sustain 'itself' and I walk away debt-free.
But apparently I'm not a rich person so that kind of accounting doesn't apply to me.
True, but the difference is all about what happens when you can't pay the 10% interest or get into significant negative equity. If you can just walk away, then you have "rich person accounting."
Fyi, if you live in the US, you might actually have access to that kind of financing. Non-recourse loans for retail clients do exist in many states in the US, including California and Texas, and they're the default for all government-backed mortgages in the US [0]. But globablly speaking, they're the exception, yes. I don't know what the situation in the Bahamas is like.
Leveraged buyouts are certainly a thing that sounds like it shouldn't be possible the first time you hear of it. It seems extremely odd that you can buy a company with money you don't have and then have the money take on that debt instead of having to take it on yourself.
As I understand it, this works by rounding up potential loans, approaching the board of the company and getting them to sign over ownership of the company for a pittance in return for the shareholders being paid out by the company using the loans you brought in. This feels more like an emergent property of the system (specifically, contract law and how publicly traded companies operate) than how the system is intended to function.
Intuitively this shouldn't be possible as it's acting against the company's own self-interest despite being in the interest of the shareholders (and the buyer), but I think "the company's interest" in practice is defined by "the owners' interest" (and the owners in this case are the shareholders, who sell the company). I guess corporations aren't people after all.
The question is who is left holding the bag? If the stakeholders get paid, they are happy. The new owner is debt free, and have an ownership, so that's good. It seems to me that it may go two ways: either the lenders will be left holding the empty bag, if they can't make the money back - and it's their fault for doing a bad due diligence; OR the company gets sold off piece by piece to satisfy creditors (if they can't make the business work), which again a good thing - what purpose serves a company that cannot produce a profit ?
This view is sufficient if you view corporations entirely as entities that serve to create profit. But this view ignores externalities which are not part of this mechanical description. Specifically, what perceived value the corporation provides that allows it to generate that profit. In Twitter's case its monetization has primarily been ads, so I'm referring to what makes people invested enough in the service to make it worth for advertisers to pay to show ads to these people.
But of course your view is what's reflected in law: the corporation exists to generate profit for its shareholders, so if killing and selling it for scrap (whether directly or by proxy in a leveraged buyout ending in a firesale) provides more benefit to its shareholders than keeping it operating at a small profit, that's the logical decision. The corporation is not really "a person", it's a vehicle for its stakeholders (or shareholders). A stable service puttering along without making big profits or losses is considered the bad ending.
> Intuitively this shouldn't be possible as it's acting against the company's own self-interest despite being in the interest of the shareholders (and the buyer), but I think "the company's interest" in practice is defined by "the owners' interest" (and the owners in this case are the shareholders, who sell the company). I guess corporations aren't people after all.
Or maybe they are too much like people. Right now there's a bunch of things that I should be doing, that would be in my best interest - continue with my TODO list, or do some exercises. Instead, I'm browsing HN. This shouldn't be possible, but it is, because I'm a human - what I want to do, what's in my best interest, and what I actually do are three different things, and rarely aligned.
(Ironically, in humans this is usually called an issue with executive functioning, whereas in companies, it's the reverse.)
You were not around during the period of highly leveraged take overs starting in the 80s, were you? That is classical hedge fund behavior, if done right. The fact that Musk lending banks only get around 60 cents on the dollar on the market for the loans they gave Musk shows that it might not have been done "right" when it comes to Twitter.
"Lenders that also include Bank of America, Barclays and Mitsubishi UFJ Financial Group committed to provide $13 billion of debt financing for the deal. Their losses would amount to $500 million or more if the debt were to be sold now, according to Bloomberg calculations."
There is Elon's private wealth, mostly in tesla stock from what I understand. The cash and assets from the companies at which he is (majority) owner, CEO or a combination thereof are not his, they belong to his companies, which are separate legal entities.
Yes that's the approximate amount they have to pay due to the way he's done the financing of the deal. Keep in mind that the current interest is at a similar amount to there revenues from last year.
That's the reason to deeply cut expenses and to try and make more money. He could probably have serviced that debt if everything just kept going as normal (no big ad spend cut) and he had fired everyone but that's an impossible scenario.
It’s going to be something like that. He bought it for 44 billion. That was mostly loans. Those loans are transferred to the company and the company pays interest on them.
The banks committed to the loans at the point of the takeover proposal (end of April). The macroeconomic lookout was better. Since then, just about every tech stock is down >20% and Musk has helpfully made unfounded accusations of bots and spam and whatnot in a pointless attempt to delay the acquisition, meaning the banks now have to try and unload these loans in a recession. I think last I heard they are giving a 40% discount or just keeping them on their books, hoping for a recovery as Musk trashes the company value further with every week that passes.
Yep, agree. Twitter's revenue was primarily from ads, and now I'd bet their ads revenue has dropped a huge amount. Given how Musk is behaving now (reinstating Trump etc.), and losing many pivotal sales people, and the firing of a ton of people in charge of dealing with hate speech and such, it seems unlikely advertisers will return now.
advertisers wont care in a couple months. the situation has lots of public attention now, which is what the advertisers are actually afraid of. They don't want their brand associated with the craziness. They don't actually care one way or the other about any choice musk makes. They're not going to just walk away from a 300+ million person audience permanently just due to principles
No but if there is no content moderation and Twitter becomes even more of an open cesspit than it already was, announcers are going to stay away because most of them do not want to be associated with toxicity. Perhaps politically active organizations will want to be there (e.g. the NRA or the ACLU), but nothing family-friendly (e.g. Disney) and most likely nothing Christmas-y during Christmas season.
Only if ill-intended parties pressure those advertisers and effectively threaten them with that bad publicity for sticking around. It changes the game when there is coercion by third parties who are more than happy to see Twitter collapse if it isn't governed by their desired policies and worldviews.
If Twitter becomes (even more) a platform for hate (or at least "highly militant") speech, placing ads on Twitter, especially close to said hate speech becomes bad publicity, regardless of third parties. If you ware placing an ad for a mattress or a family movie, would you like it to be seen by people who are in the middle of a flamewar?
I don't presume to be an expert on how reader sentiment colors an ad view. But it would surprise me if it had as big an impact as people claim, or if people actually think the advertiser is picking a side or condoning bigotry, for example. We are used to seeing unfitting advertising strewn across the web, for better or worse, without correlating it with the subject material of the page. It would at worst devalue the ad space for being poorly targeted.
Furthermore, you would need to supply evidence that hate speech is more prevalent instead of merely fearmongering that it is allowing such.
> I don't presume to be an expert on how reader sentiment colors an ad view. But it would surprise me if it had as big an impact as people claim, or if people actually think the advertiser is picking a side or condoning bigotry, for example. We are used to seeing unfitting advertising strewn across the web, for better or worse, without correlating it with the subject material of the page.
That's entirely possible. I'm certain that big brands know better than me.
> It would at worst devalue the ad space for being poorly targeted.
Isn't this kinda synonymous with what I was claiming? Or are you saying that big ad spenders would come back but only if Twitter lowered its pricing? It's pretty clear that Twitter will do the latter, so we'll see about the impact.
> Furthermore, you would need to supply evidence that hate speech is more prevalent instead of merely fearmongering that it is allowing such.
And yet it has happened with great regularity. YouTube alone has been the site of numerous such advertiser withdrawals, so much so that its users coined a name for them, 'Adpocalypses'. It is often journalistic enterprises who see fit to gin up the severity of the content and to target any advertiser for coercion whose ad appears on a given 'problematic' video.
At this stage, I have no clue whether there is or will be content moderation in three months time. By now, Musk has said many, many things, often contradictory. Some of these tweets may turn into facts but I doubt Musk himself knows which ones.
I stand by my earlier claim: if there is no (or not enough) content moderation, most advertisers will not return. If there is, they may.
They might if other channels aren't saturated and things are still in flux. Kanye was unbanned yesterday. Do you think he's going to behave better or worse than before? If he behaves worse then that's another headline, another news cycle about whether he should be banned or not.
Right now the trend is advertisers getting more spooked because of unpredictability and Musk being unable to reassure them in calls he has been reported to have been on. I expect this trend to continue
As I understand it, most of the ad slots were sold at a yearly sales event. This time most advertisers were cautious because the company couldn't respond to questions of how Elon Musk's takeover would affect the company (and specifically the type of content alongside which the ads would appear) as this was happening before he took over but after the sale was practically a done deal. This left them with only a fraction of the ad slots "pre-sold" compared to a normal year.
Additionally it seems a lot of advertisers have cautioned their ad departments to halt spending on Twitter ads for now because they're still unclear about wtf Elon Musk is up to (not to mention the mass impersonation fiasco that allegedly resulted in share prices of several companies being affected negatively).
It's not just sales people, Twitter seems to have gotten rid of most of its external communications people to the point where journalists can't even find anyone to ask for statements other than Elon Musk himself (which may be intentional given that he likes to present himself as the face of his companies).
But if Twitter's ad sales really did rely so much on these sales events, I'd wager that the sales people largely existed to communicate directly with long-standing big-spend advertising partners. It's hard to overstate how much these types of deals hinge on "social glue" rather than cold hard numbers (which can be interpreted/reframed to be interpreted however you want as long as both sides are happy).
Well it's all rumors, but if the news was good then Elon would be trumpeting it from the hilltops since his brand and the company's depends on the perception of his business acumen. He's certainly trying to do that[1] whereas the response has been lukewarm. Meanwhile, his people with direct relations to the major ad buyers are getting fired[2], and the handling of the relationships with industry groups seems poor[3].
The issue is Twitter under it's current debt burden can't afford to lose any of its advertisers. It needed to find a $1 billion of savings somewhere to keep the deal viable, and not lose any advertising revenue. Due to the acquisition that's off the board entirely due to tanking their guaranteed revenue[4] to the tune of $600-900 million, and since then Musk has done almost everything possible to drive away ongoing spend. So at this point, Twitter is in the hole to at least $600 million of revenue, bringing their minimum current loss for this year up to ~$1.5 billion. If you needed to explain one thing, it's that the massive quick firings were a desperate move to not lose money on that, but it's a false economy and Elon's being ruining any gains by continuing to make moves which seem like they're hemorrhaging even more ad-dollars.
If you consider that engineers cost about $1000 a day and he got rid of 4,000 of them… oddly it works out to about $4 million per day.
I’m not an expert in math but it’s seems pretty possible.
Plus they’ll have a lot more impressions to sell now that people are allowed to speak. Ad rates might drop but then someone will write an article about how they are getting great CPC on Twitter and everything will be back to normal after the blue checks have their sob fest.
Dead cat bounce. Engineers are paid $1000 a day because they create value to the tune of $10 000 a day. So maybe you saved $4 million a day in very short term, but now the momentum is gone, and soon you will not be earning $40 million a day from the value that now was not being created, just in a "few" short months.
I wish Elon the best, but he could have hired his own team of "hardcore" engineers and put them to work 80 hours a week, spending a fraction of the price that was paid.
> Engineers are paid $1000 a day because they create value to the tune of $10 000 a day.
If this was true then either the non-engineers in twitter have been destroying many times their salary in value or twitter has been obscenely profitable these last few years.
SWE are not assembly line workers, they are the people that build the automated assembly line. It’ll keep functioning well enough without them and with a much smaller team performing maintenance. I’d even bet on new feature being released faster now that they’ll be owned by highly motivated individuals instead of committees of managers and randomly assigned engs.
In terms of changes to the Platform ditto. It's not difficult to make these changes that a team of 100's of devs who are not 100% aware of what's there already can't figure it out. I've taken over systems that I knew very little of and were pretty big (not as big as twitter) and I managed for years to make changes without drastically breaking stuff. In any event if they do break stuff they will be able to fix what they have broken.
No, the real failure here is the massive debt burden and the fact that there is no way that twitter can ever service that amount of debt. Note that before EM took over it was ticking along with a relatively small loss. If they had cut headcount by maybe 10% they would have been break even easily. There is no way that's possible with $4million of interest per day. They have to radically change the way they monetise the platform to get to that level. I don't think they will ever get there and Musk will sell off at a bargain basement price at some point in the future to pay back the debt.