Musk told banks that he intends to rein in Twitter pay and profit from tweets.

(Reuters) According to three people familiar with the matter, Elon Musk told banks that agreed to help fund his $44 billion acquisition of Twitter Inc (TWTR.N) that he would cut executive and board pay at the social media company in an effort to cut costs, and that he would develop new ways to monetize tweets.

According to the individuals, Musk made the pitch to bankers as he attempted to arrange funding for the buyout days after submitting his bid to Twitter on April 14. His financial pledges, which he submitted on April 21, were crucial in Twitter’s board accepting his “best and last” bid.

Musk had to persuade the banks that Twitter’s cash flow was sufficient to cover the loan he was seeking. In the end, he was able to acquire $13 billion in loans secured against Twitter, as well as a $12.5 billion margin loan secured against his Tesla Inc (TSLA.O) stock. He promised to pay the balance of the payment with his own money.

According to the sources, Musk’s pitch to the banks consisted of his vision rather than solid pledges, and the exact cost reduction he would seek once he controls Twitter are unknown. According to the sources, the proposal he detailed to banks was lacking in depth.

Musk has tweeted about cutting the wages of Twitter’s board directors, which he claims will save the company $3 million. According to corporate documents, Twitter’s stock-based compensation for the 12 months ended December 31, 2021 was $630 million, up 33% from 2020.

Musk also used Twitter’s gross margin, which is substantially lower than peers like Meta Platforms Inc’s (FB.O) Facebook and Pinterest (PINS.N), in his argument to the banks, claiming that this allows lots of room to run the firm more cost-effectively.

Because the topic is private, the sources requested anonymity. Musk’s spokesperson declined to comment.

According to Bloomberg News, Musk expressly highlighted job cutbacks in his pitch to the banks on Thursday. According to one of the insiders, Musk will not make any decisions about employment layoffs until he takes control of the firm later this year. He moved forward with the purchase despite not having access to sensitive information about the company’s financial performance or headcount.

According to the individuals, Musk told the banks that he wants to build features to boost company income, including new methods to monetize tweets that contain significant information or go viral.

Charge a charge when a third-party website wishes to quote or embed a tweet from verified persons or organisations, for example.

Musk offered a number of modifications to the social media giant’s Twitter Blue premium membership service in a tweet earlier this month that he later deleted, including lowering the price, prohibiting advertising, and allowing users to pay in the cryptocurrency dogecoin. Blue, Twitter’s premium service, is now $2.99 per month.

Musk indicated in a deleted post that he wants to minimise Twitter’s reliance on advertising for a large portion of its revenue.

According to the sources, Musk, whose net worth is estimated to be $246 billion, has suggested that he will assist the banks in selling the syndicated loan to investors, and that he may provide further specifics of his Twitter business plan at that time.

Musk has also appointed a new Twitter CEO, according to one of the individuals, who declined to reveal the person’s identify. He told Twitter’s chairman, Bret Taylor, earlier this month that he had lost faith in the company’s leadership in San Francisco. Parag Agrawal, who was designated Twitter’s CEO in November, is anticipated to stay on until the firm is sold to Musk.

According to one of the sources, Musk has been besieged with bids from possible equity partners to join him in the Twitter transaction, and he will decide whether to pair up with someone in the coming weeks. Given that the purchase is not structured as a standard leveraged buyout, Musk is unlikely to collaborate with a private equity company, the person noted.
Musk said on Thursday that he sold $4 billion worth of Tesla stock, presumably to help fund his Twitter acquisition. find out more

According to the sources, the Tesla CEO also told the banks that he will pursue moderation practises on the social media platform that are as free as feasible within the legal limits of each jurisdiction in which Twitter operates, a view he has previously stated.

The $13 billion loan is seven times Twitter’s estimated profits before interest, taxes, depreciation, and amortisation for the year 2022. Some banks opted to engage just in the margin loan because it was too risky, according to the sources.

According to the individuals, several banks opted out because they thought Musk’s unpredictability would lead to a talent exodus from Twitter, damaging the company’s operations.

A request for comment was not returned by a Twitter spokeswoman.