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Elon Musk Needs to Make Twitter More Profitable. His Latest Idea Isn’t the Way to Do It.
Over the past month, as he put together an offer to buy Twitter and then saw that offer accepted, Elon Musk has said and tweeted many odd things. But one of the oddest was something that, according to Reuters, he told bankers when he was trying to put together financing for the deal: one way Twitter could make money was by charging third-party websites to embed or quote tweets from verified users and companies.
It’s not surprising that Musk was talking to the bankers about ways to improve Twitter’s profitability. On top of the $21 billion in cash he’s putting up, Musk is borrowing roughly $25 billion, half in the form of a margin loan against Tesla stock and half in the form of bank loans and junk bonds collateralized by Twitter’s cash flow. So in order to convince bankers to make those loans, which collectively are going to have interest costs of nearly $1 billion a year (which is more than Twitter currently earns), Musk needed to give them some ideas about how he’ll be able to boost the company’s bottom line. One of those ideas, not surprisingly, was cutting costs by firing people. Another was this idea of charging for tweets, which is an idea that could only have been floated by someone who doesn’t fully understand how Twitter works or what its business depends upon.
