Elon Musk told banks that agreed to help fund his $44 billion acquisition of Twitter Inc (TWTR.N) that he could crack down on executive and board pay at the social media company in a push to slash costs, and would develop new ways to monetize tweets, three people familiar with the matter said.
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 (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 Platform 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.