Shock management, culture of performance, elimination of telecommuting… The new boss is inspired by the model implemented at Tesla. Rest days? Down the drain, according to Business Insider. They would have been removed from the calendar since the change of management. To cover his costs, Elon Musk also wants to save 1 to 3 million dollars every day by reducing the number of servers owned by Twitter. But the hardest part for the billionaire won’t be cutting spending. It will be to make this business profitable, which is far from won.
To afford the social network, the billionaire has committed 25 billion dollars of his personal fortune (about 7%). The richest man in the world has pledged his shares in Tesla to raise funds. Despite this contribution, Elon Musk did not have enough cash to carry out this $44 billion takeover bid. The banks therefore agreed to lend him 12.7 billion. A margin loan, which is also his ball and chain. In doing so, Elon Musk heavily indebted the company by buying it through leverage.
Read alsoWhat (really) awaits Elon Musk after the Twitter takeover
A financial arrangement which today explains the urgency of Elon Musk to reduce expenses. The billionaire’s creditors, including the banks Morgan Stanley, Bank of America and Barclays, are worried that they will not be able to resell this debt, which “sticks” to their balance sheets, before next year. At present, this operation would have already cost them more than 500 million dollars, affirms The Wall Street Journal. Two French banks, Société Générale and BNP Paribas, were also associated with the operation to the tune of 1.35 billion dollars.
For a company that does not make money, the room for action will be narrow. In addition to banks, Elon Musk has approached several funds (Sequoia Capital, Fidelity, Qatar Investment Authority) and investors, including Oracle founder Larry Ellison and Saudi Prince Al-Walid bin Talal, to give himself a little ‘air. But will these investors be willing to put cash back into a company that hasn’t made a profit since 2019? Based on its 2021 fiscal year, Twitter would need to achieve at least three years of net revenue to repay its debt.
However, its revenues, which are 92% dependent on advertisers, are likely to suffer: the advertising market is slowing in the United States and several market leaders also fear that Twitter’s inventory (available advertising space) will decline in quality. The IPG Mediabrands group, one of the market leaders, has “advised its customers”, including Coca-Cola, Mattel and Unilever, to “pause their investments for a week on Twitter”, confirms Isabelle Brenton. , vice-president in charge of communication at Mediabrands.
The subscription? Perhaps Elon Musk’s last card to save the social network. According to the New York Times, the new boss of Twitter has reportedly postponed the launch of his new offer to $ 8 a month after the midterm elections. This “Blue” offer will, in particular, allow you to have your account certified on the platform and benefit from less advertising. A necessity for the billionaire, who claims to want to return “power to the people”. A very vague commercial promise, which does nothing to reassure advertisers on the market.