Why Is Elon Musk Lighting Billions of Dollars on Fire?



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Maybe this year hasn’t been the best for you. However, find some solace in the fact that you did not YOLO yourself into overpaying for an unprofitable social media platform, publicly try to get out of the deal, get lawyered into paying, liquidate billions of dollars worth of stock in a down market to do so, take over a company you didn’t really want, shitpost your way into a revenue crisis, quit paying your bills, antagonize your super-users, wink at Nazis, and deci Or at least not unless you’re Elon Musk, which is unlikely. The disgraced cryptocurrency tycoon Sam Bankman-Fried, who improbably prevented Elon Musk from being named the Tech Fortune-Crater of the Year, may have fared better than Twitter’s new owner. Musk nevertheless spent 2022 setting his reputation and billions of dollars on fire.

Many queries, such as Why?, Why?, and Why?!, are raised by Musk’s actions. And will he declare bankruptcy over this? He appears to be making an effort to: Tuesday night, Musk declared that he will step down from his position as Twitter’s CEO “as soon as I find someone stupid enough to take the job!” He and whoever is stupid enough to succeed him undoubtedly have a difficult year ahead of them. One expert calculated that the former wealthiest man on Earth took over a business that was losing $220 million annually and tripled its losses by ten, if not more. For the foreseeable future, it appears that Twitter will continue to lose users, advertisers, and money. However, Musk must fund the social network as well as administer it. Additionally, he is one of the few individuals on the earth with virtually limitless wealth to lose.

Musk’s acquisition of Twitter never really made financial sense. Since its launch in the middle of the 2000s, the company’s main microblogging product has hardly changed. In the US, it is no longer growing in user base. Its level of participation is dwindling. According to monthly active users, the company is less than one-third as big as TikTok and one-tenth as big as Facebook, and it has only made money twice out of the past ten years.

But Musk didn’t purchase the platform for financial gain; he did so for ideological and personal reasons. He committed to pushing Twitter to become more accommodating to the political right by purchasing a sizable portion of the company’s shares in the spring. In a letter to the company’s then-chair shortly after, he made the offer to take it private and transform it into “the platform for free expression around the globe,” by which he appears to have meant the platform for instigation of anti-Semitism, racism, and white nationalism. Additionally, Musk is an impulsive, wealthy man who simply loves to post things online. He has suggested nuking Mars, attacked a hero for saving a group of schoolchildren, made “boner” jokes about Bill Gates, and even gotten into a fight with the Securities and Exchange Commission by claiming falsely that he had “secured” funding to take Tesla private at—breathe deeply—$420 per share.

Musk was a man of peculiar methods and peculiar aims. And in April, he made a bid to purchase Twitter at a price that was far more than its share price at the time, $54.20 per share (inhale again). Naturally, Twitter’s executives accepted the offer. Although there was a big price tag, the strategy was simple: Take charge of Twitter. Limit your losses. broaden the source of its income Ensure the business is profitable. Hold it, sell it, or probably make a new public offering of it. Make money.

Musk did reduce the budget’s costs, but in an irregular manner. More than half of the company’s employees were fired by him, and those who were left were asked to participate in a “very harsh” cultural reset. Drew Pascarella, an M.B.A. corporate finance instructor at Cornell, told me that this resulted in “substantial savings,” and that Musk also appeared to have set up the business to renegotiate its lease and other contracts.

But Musk has also drastically reduced Twitter’s revenue. The social network gets almost all of its money from adverts. In the past two months, a large number of well-funded businesses—Chevrolet, Ford, Jeep, BlackRock, Citigroup, Chanel, Nestlé, Coca-Cola, Merck, Verizon, Wells Fargo, and the list goes on—have halted or withdrew their advertising. Wedbush Securities analyst Dan Ives told me that he believed the cost of Musk’s buyout to be as high as $4 billion. Ives remarked, “That’s a stomach punch.

I should point out that due to Musk, those businesses have stopped running advertisements on the website. Musk himself posted on Twitter that “activist groups lobbying advertisers” was to blame for Twitter’s sharp decline in revenue. Really screwed up! They’re attempting to end free expression in the United States. Additionally, he argued that while his presidency, hate speech had decreased. However, separate researchers discovered the reverse. Following his election, there was a 202 percent spike in the use of the N-word, double-digit increases in the usage of homophobic, misogynistic, and transphobic insults, and an exponential rise in the use of the slur groomer. Coca-Cola does not want to place its advertisements next to offensive language and anti-Semitic memes, including one that Elon Musk has posted.

Additionally, when Musk used a leveraged buyout to purchase Twitter, he piled on debt while buying it, totaling about $13 billion. Even if it is losing money, the corporation will still have to make debt payments of almost $1 billion annually. It offers choices. Musk is “unfathomably wealthy,” according to Pascarella, who could write the cheques. I have no reason to think he won’t be able to come up with several billion dollars in cash if necessary, even though the majority of his fortune is not readily accessible. Musk might purchase the company’s debt from its creditors. He could raise fresh equity funding; in fact, it appears that he is actively attempting to do so. Or, in the worst-case scenario, Twitter might fail.

Ives pointed out that Musk is currently using Tesla stock “as his own ATM machine to cover the losses from Twitter.” However, his actions have destroyed Tesla’s stock, which has fallen 42% in the last six months. (In contrast, shares of Toyota are down 13% while those of Ford are flat.) Tesla’s stockholders are restless and justifiably incensed, so it might be an issue if the company’s financial situation worsens. Both the social network and the carmaker could suffer from a general economic downturn. The possibility of losing control of Tesla is perhaps the risk that Musk is most concerned about personally.

It is not exactly a happy financial balance that Musk maintains personally subsidizing this thing that he bought, despises, and is destroying. To get the social network back on track, some adult will need to intervene: keep it going, make necessary cuts, and get it ready to relaunch as a public company a few years from now. Whoever is stupid enough to want to do it, good luck.

So that is all in this article “Why Is Elon Musk Lighting Billions of Dollars on Fire?” We hope you learn something. So keep an eye out and stay in touch. Follow us on to find the best and most interesting content from all over the web.