[intuitionist]

The outside investors in X made a profit on paper; Twitter was bought for $44B but the deal was financed with like $31B in equity and $13B in debt. It’s not a big profit (in fact it’s worse than you would have done in T-bills), and of course they’re swapping one illiquid and hard-to-value asset for another, but Elon isn’t giving them a 25% haircut at all.

[echelon]

Even if he made the Twitter investors whole, I wonder how the investors in xAI feel.

[onlyrealcuzzo]

They feel great, because he just magically turned a ~50% loss in Twitter into a ~50% return in xAI and a ~0% loss in Twitter.

Of course, you can't buy $20B worth of mangoes for $40B worth of Mango Holding Company stock and then suddenly make your mango-holding business worth twice as much money.

But you can pretend!

Private valuations, especially VC-funded companies, have been nonsense for decades. Elon is just exploiting that egregiously.

[chrisco255]

They're mostly the same investors.

[johannes1234321]

They just wait for the next round of this. Maybe SpaceX will require more AI? Or Tesla?

[zahlman]

Isn't Twitter's stock price higher than it was at acquisition?

[kelnos]

As the sibling pointed out, private companies don't have stock prices. But I've read estimates that Twitter is worth less $10B now, so less than a quarter what Musk paid for it.

[DoesntMatter22]

The banks just recently did a debt sale of a lot of that debt close to list price, so 44 billion dollar valuation is probably reasonable. Apparently the company is profitable now, sans the debt, so as long as it doesn't go out of business and can grow on other fronts then it's probably not a problem.

[SideQuark]

Can you list this sale you claim valued X at 44B?

Fidelty, which still owns a decent chunk of X, and is required by law to do due diligence on the value of that holding, and also has deeper insight into the value of X since they are also required to see X financials (since they own a big chunk of the private value), puts X value at 20% of the original 44B.

So please demonstrate your claims.

https://www.forbes.com/sites/tylerroush/2024/09/30/elon-musk...

[ralfd]

A few weeks ago in February:

https://www.investing.com/news/stock-market-news/musks-x-sec...

> Banks have completed the sale of $5.5 billion in debt for Elon Musk's X, according a Wednesday report by the Wall Street Journal. The debt offering was increased following a strong response from investors. Ultimately, the loans were sold at 97 cents on the dollar.

This is not the same, as no ownership was traded, but it signaled surprising confidence that the debt could be sold with only a small discount.

[SideQuark]

That does not value X at $44B as the poster claimed. It also states “ These floating-rate debts have an interest rate of around 11%, making the borrowing costs several percentage points higher than even the riskiest loans on Wall Street.” which is a spectacular admission the markets put X on incredibly shaky ground.

X being forced to sell off debt at such extraordinarily bad terms means X is likely about to implode.

[rwmj]

> profitable now, sans the debt

So, not profitable.

[j_maffe]

What، acompany needs to cover the costs of how it was acquired, now? If it's valued at the price it was purchased and making a positive revenue stream then it is profitable.

[dave4420]

Yes, this seems to be common practice.

1. Borrow lots of cash

2. Buy a victim company with the cash

3. Carry out weird financial/legal alchemy to make the victim company solely responsible for paying off the loan

4. If the victim company can’t handle the debt and goes bankrupt, then you don’t own the company any more. That’s sad. Especially for the people who lose their jobs. But the people you borrowed the cash from can’t chase you for it, so no harm done, eh?

5. If the victim company pays off all the debt, then congratulations: you bought a successful profitable company for free!

I don’t understand step 3 or why it’s legal.

[acdha]

They need to cover their debts. If someone uses private equity raider tactics to load the company up with debt, it’s likely to be bad for the company but it still counts on their books just as taking payday loans is ill-advised but legal.

[largbae]

This is part of the reason that the term EBITDA exists.

[DoesntMatter22]

With the debt it's break even.

[rwmj]

So, not profitable.

[rurp]

This makes no sense. The debt payments are larger than the company's entire revenue! The Twitter purchase was a financial boondoggle that Elon is attempting to hide with this latest deal.

If I borrow $4 million to buy a house worth $1 million I could technically say that sans the debt I'm a millionaire, but that's hardly a useful or positive claim.

[FormerBandmate]

Rhis raises it back to the original level (although entirely based off the absurdly overinflated value of Grok at $80 billion. VCs…)

[ceejayoz]

Twitter doesn't have a stock price. It got taken private in the acquisition.

[azemetre]

Also I think Fidelity open puts out statements on the value of Twitter since they are a shareholder. The only recent info I can find on this was an article from last October:

https://www.forbes.com/sites/tylerroush/2024/09/30/elon-musk...

Where it states that Twitter is now worth 1/5 of its $44billion price. I highly doubt it re-made up the equivalent value in the span of 6 months. If anything they likely lost more money as advertising sales have plummeted.