Elon Musk has lined up a new CEO for Twitter and told banks that agreed to help fund his $44 billion acquisition offer about his plans to monetize tweets, according to a new report from Reuters. A source told Reuters that Musk has decided on who he plans to appoint as the new chief executive of Twitter, but the source didn’t name the person. Twitter’s current CEO Parag Agrawal, who took the role after Jack Dorsey stepped down in November, is expected to remain as CEO until the deal is completed.
Reuters reports that Musk told Twitter chairman Bret Taylor that he does not have confidence in the company’s management, which is a sentiment that he also stated in SEC filings. Agrawal would be set for a significant compensation package if the deal closes and Musk brings in new management, as he would receive $38.7 million due to a clause in his contract, according to the company’s latest proxy filing.
Reuters reports that Musk told banks that he plans to develop more ways to make money from tweets. For example, he said that he plans to create a way to monetize tweets that go viral or include important information. He also suggested the idea of charging a fee when third-party websites quote or embed tweets from verified accounts.
The Washington Post reports that Musk additionally raised paying powerhouses to make content for the stage, which is a plan of action that has shown to find actual success for TikTok. Musk is additionally supposed to be keen on the possibility of membership benefits that the organization could offer.
In erased tweets from recently, Musk recommended massive changes to Twitter Blue, which is the web-based entertainment goliath’s membership administration that is presently evaluated at $2.99 each month. Musk proposed reducing the cost, adding a method for paying in dogecoin and forbidding publicizing. In another now-erased tweet, Musk said he needs to move Twitter away from its reliance on promoting for a lot of its income.
Musk had additionally told the banks he could take action against chief and board pay at Twitter to slice costs. Reuters additionally reports that in his pitch to the banks, Musk said Twitter’s gross edge is a lot of lower than other virtual entertainment administrations, like Facebook and Pinterest, and contended that there are ways of running the organization in a more practical manner.
Bloomberg News reported this week that Musk spoke to bankers about job cuts as part of his pitch to the lenders. Musk reportedly won’t make decisions on job cuts until he receives ownership of the company.
Musk made the pitch to the lenders as he tried to secure debt for the buyout days after submitting his offer to Twitter on April 14, the sources said. His submission of bank commitments on April 21 were key to Twitter’s board accepting his “best and final” offer.
Musk had to convince the banks that Twitter produced enough cash flow to service the debt he sought. In the end, he clinched $13 billion in loans secured against Twitter and a $12.5 billion margin loan tied to his Tesla Inc (TSLA.O) stock. He agreed to pay for the remainder of the consideration with his own cash.
Musk’s pitch to the banks constituted his vision rather than firm commitments, the sources said, and the exact cost cuts he will pursue once he owns Twitter remain unclear. The plan he outlined to banks was thin on detail, the sources added.
Musk has tweeted about eliminating the salaries of Twitter’s board directors, which he said could result in about $3 million in cost savings. Twitter’s stock-based compensation for the 12 months ending Dec. 31, 2021 was $630 million, a 33% increase from 2020, corporate filings show.
In his pitch to the banks, Musk also pointed to Twitter’s gross margin, which is much lower than peers such as Meta Platforms Inc’s (FB.O) Facebook and Pinterest (PINS.N), arguing this leaves plenty of space to run the company in a more cost-efficient way.
The sources requested anonymity because the matter is confidential. A Musk representative declined to comment.
Bloomberg News reported earlier on Thursday that Musk specifically mentioned job cuts as part of his pitch to the banks. One of the sources said that Musk will not make decisions on job cuts until he assumes ownership of the company later this year. He went ahead with the acquisition without having access to confidential details on the company’s financial performance and headcount.
Musk told the banks he also plans to develop features to grow business revenue, including new ways to make money out of tweets that contain important information or go viral, the sources said.
Ideas he brought up included charging a fee when a third-party website wants to quote or embed a tweet from verified individuals or organizations.
Elon Musk attends the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS/File Photo
In a tweet earlier this month he subsequently deleted, Musk suggested a raft of changes to the social media giant’s Twitter Blue premium subscription service, including slashing its price, banning advertising and giving an option to pay in the cryptocurrency dogecoin. Twitter’s premium Blue service now costs $2.99 a month.
In another tweet he deleted, Musk said he wants to reduce Twitter’s dependence on advertising for much of its revenue.
Musk, whose net worth is pegged by Forbes at $246 billion, has indicated he will support the banks in marketing the syndicated debt to investors, and that he may unveil more details of his business plan for Twitter then, the sources said.
Musk has also lined a up a new chief executive for Twitter, one of the sources added, declining to reveal the identity of that person. He told Twitter’s chairman Bret Taylor earlier this month that he does not have confidence in the San Francisco-based company’s management. Parag Agrawal, who was named Twitter’s chief executive in November, is expected to remain in his role until the sale of the company to Musk is completed.
Musk has been inundated with offers from potential equity partners to join him in the Twitter deal, and he will decide in the coming weeks if he teams up with someone, one of the sources said. It is unlikely that Musk would partner with a private equity firm given that the deal is not structured as a traditional leveraged buyout, the source added.
Musk disclosed this week that he sold $8.5 billion worth of Tesla shares, a move likely aimed at helping finance his deal for Twitter. [nL2N2WR04A]
The Tesla chief executive also told the banks he will seek moderation policies on the social media platform that are as free as possible within the legal constraints of each jurisdiction Twitter operates, the sources said, a position that he has repeated publicly.
The $13 billion Twitter loan is equivalent to seven times Twitter’s 2022 projected earnings before interest, taxes, depreciation and amortization. This was too risky for some banks who decided to participate only in the margin loan, the sources said.
Another reason some banks opted out is because they feared Musk’s unpredictability could result in an exodus of talent from Twitter, harming its business, according to the sources.
Twitter says the transaction, which was unanimously approved by the board, will likely close this year following shareholder and regulatory approval and “the satisfaction of other customary closing conditions.” Musk will have to pay Twitter a $1 billion termination fee if he doesn’t go through with his acquisition of the social network, per a recent SEC filing. The filing, which details the terms of the agreement, indicates Twitter would have to pay the same fee under specific circumstances.