The numbers are already daunting. The $44 billion acquisition was
the largest leveraged buyout of a technology company in history.
To do the deal, Mr. Musk, the world’s richest man, loaded about
$13 billion in debt on the company, which had not turned a profit
for eight of the past 10 years. The deal was inked before the
global economy looked to be headed toward a recession as interest
rates surged higher. And digital advertising, which makes up 90
percent of Twitter’s revenue, has been falling at social media
Last year, Twitter’s interest expense was about $50 million. With
the new debt taken on in the deal, that will now balloon to about
$1 billion a year. Yet the company’s operations last year
generated about $630 million in cash flow to meet its financial
That means that Twitter is generating less money per year than
what it owes its lenders. The company also does not appear to have
a lot of extra cash on hand.
Interest payments are a bitch. The optimistic take on Musk taking Twitter private is that it frees Twitter from pursuing increased revenue at all costs to please shareholders. But what’s the point if Twitter now needs to pursue increased revenue at all costs to service its debt?