January 31, 2023 at 01:30
Twitter has made its first interest payment on its more than $12.5 billion in looming debt, according to reports from Bloomberg and the Financial Times. Elon Musk took out billions of dollars in loans back in October 2022, as part of the billionaire’s successful push to purchase Twitter and take the social media platform private. And, through that $44 billion acquisition deal, the nearly $13 billion in loan debt became Twitter’s responsibility.
The initial interest payment, due and presumably paid on Friday, likely cost the company an estimated $300 million, according to Bloomberg. Twitter reportedly paid that amount to seven banks, led by Morgan Stanley, which initially provided the acquisition funds.
The company making its first interest payment on time is a good sign, or rather it’s better than the alternative. But this initial $300 million doesn’t come close to resolving the immense sum owed. According to earlier Bloomberg calculations, Twitter will have to pay about $1 billion towards its debt every year in order to keep up with it. Annual interest alone could exceed $1.2 billion, Bloomberg reported on Monday. In contrast, pre-Musk, the company paid somewhere around $100 million in annual interest.
Yet, even prior to Musk’s takeover, Twitter struggled financially. The company only had one profitable year (2019) in its near decade as a public company. And under the leadership of the world’s second richest man, Twitter’s finances have seemed even less sustainable. The company has lost a big chunk of its ad revenue as advertisers continue to be put off by Musk’s “free speech” principles in action. Then, obviously, there’s the debt.
Musk told staff in November that Twitter could go bankrupt.
In apparent attempts to grapple with these financial dire straits, the company hasn’t paid rent at at least three of its offices, including its San Francisco headquarters, for months. Twitter has also resorted to selling off office furniture and other items at auction. The company further has laid off more than half of its employees in the past three months and slashed benefits for those who remain.
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Musk has claimed the above measures are working. In a Twitter Spaces presentation in late December, the billionaire said that the company was on track to “roughly” break even.
More recently though, the Twitter/Tesla/SpaceX CEO reportedly floated the idea of selling $3 billion of his Twitter shares to fundraise—signaling that there may still be more turmoil ahead at the bird app.