WILL THE NUMBERS WORK?

Is Elon Musk really a business man, or just the self-proclaimed “smartest guy in the room”?

Planet Earth is going to get an answer.

His $44 billion acquisition of Twitter was the largest leveraged buyout of a technology company in history; and, the numbers are ALREADY daunting. 

From what we think we know, Musk, the world’s richest man, to get this deal done, loaded about $13 billion in debt on the company, which had NOT turned a profit for eight of the past 10 years. 

That said, Musk is also looking at a world-wide economy heading into a possible recession, with interest rates going higher each quarter.

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 obligations.

That means that Twitter is generating less money per year than what it owes its lenders. 

h/t: Darden School of Business at the University of Virginia.