Twitter Sued for Nonpayment of Rent on San Francisco Office | Hacker News Reader

Twitter Sued for Nonpayment of Rent on San Francisco Office

bloomberg.com

205 pointswebwielder2225 comments

It’s not made obvious by the article, but this lawsuit is for non-payment on a lease of one floor of 650 California St, not for non-payment on the 1355 Market St headquarters. They are also not paying rent at the latter, so presumably another lawsuit is coming. My assumption though is that they have already vacated the now extraneous space at 650 California and will settle with the landlord to break the lease.

Not the only, or biggest, nonpayment lawsuit they are facing:

https://www.sfchronicle.com/bayarea/article/Bay-Area-softwar...

The article references the NYT as reporting they're not paying rent anywhere:

> Twitter hasn’t paid rent on its headquarters, or any of its other global offices, in weeks, the New York Times reported on Dec. 13.

Use this simple trick to immediately lower your companie's cost!

I kid you not, there is a Dilbert strip that is effectively the pointy-haired boss saying "In an effort to streamline operations and cut costs, we've decided to start stealing stuff".

I'm paraphrasing, but it really was a one-liner like that.

I once worked for a company during Dotcom that failed to pay rent for 7 months, was then forced into Chap 7 at 4:30 PM on a Thursday (we were given 30 mins to vacate the office). The building management then padlocked the doors leaving everything inside for the next 7 months while the they and the major creditor fought over rent and the contents. Turned out the building and the creditor were in fact parts of the same company - Merrill Lynch. They locked themselves out.

You can go quite long without paying rent.

Maybe Musk has changed his mind about remote work:) Certainly don't need that office if you're employees work form home.

My jaded opinion is that Musk may not really care about remote work, but it turns out return-to-office requirements are a useful way to get people to leave without having to fire or lay them off, and bypass stuff like the WARN act.

> “Day zero. Sharpen your blades boys," Calacanis texted Musk. "2 day a week Office requirement = 20% voluntary departures.”

https://mashable.com/article/elon-musk-twitter-text-messages...

I think it's both -- I do think he's against remote work (remember his remarks at Tesla "pretend to work somewhere else": https://www.forbes.com/sites/annakaplan/2022/06/01/musk-says...) but also it's a great way to cheaply get rid of a lot of employees who were told they could WFH forever.

Alternate URL (still bloomberg, via yahoo): https://www.yahoo.com/now/twitter-sued-nonpayment-rent-san-0...

> Read more: Twitter’s Skipped Lease Payments Hit Bonds Tied to Headquarters

the Read More link (still bloomberg, via yahoo): https://news.yahoo.com/twitters-cost-cutting-efforts-hitting...

https://archive.ph/78H1W

> Refusing to provide toilet paper or pay rent, but employees can’t work remotely.

Why do people worship this clown again?

It used to be his fostering of the market for luxury EVs and reusable space rockets.

Now it's mostly for being the world's richest and most powerful troll, who despite his extremely privileged status still mostly punches down.

That's always a riddle for outsiders when looking at a cult of personality.

He's kryptonite for entire swathes of the nerd demographic.

1) The Dawkins-pilled atheist who subconsciously misses the messianic words of charismatic preachers

2) The well-to-do Burning Man hippie that remembers Exxon Valdez and Gulf of Mexico BP oil spill and has sworn off ICE vehicles. These ones are most likely jumping ship these days, unless they belong to...

3) The "objective rationalist" who prefers facts to feelings, dislikes political correctness and leftist hysteria and thereby appreciates Musk's thoroughly unemotional and carefully considered public statements about Nancy Pelosi and the woke mind virus.

You're not wrong but kryptonite would be repelling them not drawing them in, which I think is what you mean.

Some real "Art of the Deal" management here: delay invoice payments in an effort to bully suppliers into offering better terms, betting that they won't want the hassle of a court trial.

> Twitter hasn’t paid rent on its headquarters, or any of its other global offices, in weeks, the New York Times reported on Dec. 13.

Isn’t rent paid once per month? When I was a renter, this could’ve been said about me literally every month, once two weeks had elapsed between payments.

It likely means that the rent payment is overdue by weeks.

Commercial leases specify payments and default deadlines.

So you think Twitter is being sued for non-payment of rent based on misinterpreted semantics?

According to the landlord Twitter is supposed to have been “in default” on their lease as of Dec 21. It’s like the second sentence of the Bloomberg article we’re commenting on, before the subscription fold.

I would be interested in knowing how many other tenants this landlord has chosen to file suit on when the tenant is 7 days over due (in default in 21st, filed the suit on the 29th)? Seem very aggressive.

I wonder if politics has any bearing on their choice to file? Or the fact that Elon has publicly been considering closing the SanFran HQ?

It’s very likely this isn’t their first time running behind on rent.

I assume they’re quick to file lawsuits with larger clients because of the correspondingly larger financial liability involved (large office space, large rent, unclear corporate finances). That seems like a very normal reason to be “fast on the draw,” all incentives considered.

Doesn't in default mean they had several reminders to pay and have now defaulted and invalidated their lease agreement?

As soon as your 1 day late you are in default. Most organizations however give noticed and plenty of time before filing law suits thus my question. The "news" here seems to be lacking any context, and I assume bad intentions on the part of NY Times and Bloomberg so...

The article is too vague on details, and I don't see the actual court filing readily accessible (bad journalists! always give a link to court filings!). But given the timeline and the wording, it seems likely to me that Twitter has not paid its rent for November or December--in other words, it's not one, but two missed payments. If that is indeed the case, then I do not find it all surprising that a lawsuit would be so aggressively filed after the second missed payment.

Even if not the case, Twitter has had very public issues which make it extremely likely that it is intentionally not paying the bills that are due. Thus, if the landlord wants to get its money, it either has to get Twitter to renegotiate its contract to one that it is willing to pay, or go to court to force Twitter to abide to the contract (including, potentially, invoking early termination clause). I don't know how much Twitter is behind on to this landlord, but the initial filing costs to the landlord are likely to be in the realm of a few thousand dollars, so it doesn't take much for it to be worth it to the landlord to sue pretty aggressively.

I found it here[1] on the SF court website. It looks like they didn't pay December rent, due on the 1st. They gave them 5 days notice on the 16th and by the 29th they still hadn't paid.

[1] https://webapps.sftc.org/ci/CaseInfo.dll?SessionID=333998CD0...

I don't understand the urge to see politics everywhere, even in a normal business practice.

If you boil everything you disagree with down to "politics" then you can put it in a neat little box and pretend it doesn't exist, or that you're "above" it

It's intellectually dishonest and absolutely insulting

The fact that Twitter currently has loan payments in excess of last year's profits could be a factor. Delaying means they will be more likely to be entangled in a bankruptcy and potentially get a worse outcome if they are. Even a low probability bankruptcy would encourage some urgency.

I don’t know anything about Twitter’s books but Loan payments in excess of profits doesn’t mean you’re insolvent. It doesn’t even mean you’re losing money. You can be gaining money each year while paying more in loans than you take home in profit.

The key thing here is that the loan payments are new, and are greater than profits were before the loan payments. That doesn't necessarily mean they are losing money -- revenue could have increased, or costs decreased, to make up the difference. Losing money also wouldn't mean they're insolvent -- that only happens once liabilities exceed assets.

Still, it's definitely a signal that creditors will take note of. Good luck renting an apartment as an individual with books that look like that.

Ehhh… loans are of course an important part of the books, as is profit, but I would hold that profit/loan payments is an obscure and unhelpful metric that a competent analyst is unlikely to utilize.

Hmm, if you had net profit of X, and suddenly have a new expense of N * X, where N is greater than 2, I think that's worth taking note of, be it low payments, a lawsuit settlement, or otherwise.

It’s really not though. This comparison is just a bad way to think about things. We have plenty of well established financial ratios that tell you something useful about an org. This is not one of them.

Interest expense hits net income. Actual debt payments do not. The ratio is out of whack if you didn’t make a profit last year or had a tiny profit.

What are we actually trying to identify here? Insolvency? Leverage? Long term Credit risk? If you tried to present this as evidence for anything you’d get kicked out the door by someone who knows what they’re doing.

Maybe they took on a ton of new debt. That is interesting! But the way you explore the salience of that fact is not by comparing the next year’s debt payment to the last year’s net income…

So how would someone who "knows what they are doing" evaluate the credit risk of Twitter given only the information available to those outside of Twitter? You keep telling us how not to do it, so what is the right way, and what does that way tell us?

I don’t know what is and isn’t available for Twitter. I don’t really care and my lack of a precise answer here doesn’t make the given answer more useful.

But generally you would look at things like the current ratio, the debt to equity ratio, the interest coverage ratio; and of course a look at what’s changing in the business landscape, what the debt will be used for, what competition is doing, etc.

You could also look at the credit ratings of companies which for Twitter looks like it was recently brought down to a B- and then removed due to missing information by S&P.

I admit that I have not done a good job of explaining what I'm driving at here, but payment shock is neither an obscure nor unhelpful concept in consumer finance. If you suddenly take on a very large, new payment, that creditor will want to see some separate evidence that you can make said payment. An income statement is one such piece of evidence, but obviously Twitter can't use that since they weren't earning enough to make the payments before.

Obviously corporate finance is a very different world. Musk was obviously able to demonstrate to his new creditors' satisfaction that Twitter will be able to make these payments (I don't see evidence of an ulterior motive here). It's still a real concept. Not conclusive on its own, but it is a signal among many.

They aren't going to go bankrupt. But they have been a money losing operation 14 of 15 years

They now have $1b in debt interest due every year.

Yeah but they also cut two thirds of thier staff and have cut other costs and will continue to do so.

People here hate musk but Twitter will no go out of business.

> I wonder if politics has any bearing on their choice to file? Or the fact that Elon has publicly been considering closing the SanFran HQ?

I suspect a bigger the fact that Elon has repeatedly publicly indicated things like that Twitter has been barreling toward bankruptcy since around the time of his offer to buy, and that a filing may be imminent within the next year. (Now, those public statements have been largely to deflect public criticism of his management decisions and bully employees into accept poor working conditions, but creditors can hear and react to them, too.)

When it's 100x your apartment rent on the line, late payments don't happen. The landlord will be lucky to recover the costs they're collecting while rent remains unpaid.

Edit: reminded me of this :-D

https://abcnews.go.com/Business/bank-america-florida-foreclo...

Some claim Twitter is attempting to renegotiate. That may well be true. But this doesn't fit in well with the greater narrative.

Since Elon's takeover of Twitter, it's been one PR disaster after the next. Mass layoffs, begging people to come back, cutting remote work, cutting in-office catering, the whole Twitter Blue debacle, unbanning some of the worst, the drop of advertising spend on Twitter (which, at least in part, is somewhat explained by the general market but part of it isn't), trying to fire the previous executives for cause to avoid golden parachutes, arguably not paying promised severance, Elon's controversial politics going front-and-center, the list goes on.

Reputation matters.

Not paying rent fits into the broader narrative that Twitter is desperately cutting costs and is haemorrhaging money. Elon's Tesla stock sales fit this too. How do you attract and retain talent when people aren't sure about the company's future or they see how easily Elon discards staff?

Even in today's market, companies have to work to hire and retain good staff. And they can't completely rely on work visa indentured servitude, as much as they seem to be trying.

They had to cut costs to keep away from the "fast lane to bankruptcy". When not pulling in enough revenue, you have to act quickly.

https://youtu.be/HE5CTKqWEV0?t=3570

Wasn't twitter supposed to stop working by now? They are still functioning, despite the layoffs. Maybe it worked?

They had a major outage a few days ago, and I see a steady stream of reports from people of little things not working.

It was not really an outage. Devices had to login again. I noticed having to do that.

Your experience was not the sum total of the incident. There was indeed a partial outage: https://news.yahoo.com/twitter-down-thousands-users-downdete...

And it was fixed in due time.

> Wasn't twitter supposed to stop working by now? They are still functioning, despite the layoffs. Maybe it worked?

I still expect it to stop working gradually, then all at once. Saying that the fact that Twitter hasn't collapsed yet means the previous staffing level was not justified is a bit like saying you shouldn't have paid a builder to put in a foundation because your house hasn't fallen down yet.

I don't think anyone is truly shocked by the notion that Twitter is over-staffed with a lot of fat it can cut. They were not exactly employing a lot of "builders", as they had not updated any new features for quite some time.

This reply seems to be assuming (like Musk seems to have done when he came in with the kitchen sink) that the only jobs of relevance there are engineers and product folks building new features yet the loss of their important revenue streams that are causing an existential crisis for the company seem to be primarily about losing people with "softer" jobs like compliance and advertiser relations.

I'm sure there was some fat that could have been cut away from Twitter pre-Musk but its pretty clear the attempt to do it was made with a chainsaw and not a scalpel.

> the loss of their important revenue streams that are causing an existential crisis for the company seem to be primarily about losing people with "softer" jobs like compliance and advertiser relations.

Its mostly related to gaining a new CEO, and the resulting instability imposed by that CEO, not the presence or absence of particular subordinate staff. (Heck, a lot of it happened based on the discussions and purchase offer created uncertaintu, when all the staff were still there.)

When turning around a company, it's not uncommon strategy to move fast even if it creates a little chaos. There's been business books written about it. Some call it chaos theory. The new ceo comes in makes some important early decisions, stirs the pot a little. Meanwhile, the things needing to get done get done. When dealing with a large or semi-large organization that has a strong built-in stasis, not sure there is a better way.

And, to be sure, Musk has gotten alot done in just a short time. He cut expenses, did a re-org of the company, and even did some product improvements, all while overseeing a massive document dump via the Twitter files in the interest of transparency. We can debate relative significance of all these things, but these are not trivial things.

The only reason they were in the fast lane to bankruptcy is that Musk voluntarily gave up almost all Twitter's revenue, he put them in that lane. They could have cut head count, massively reduced costs and restructured whilst simply saying "No policies will change, advertisers are safe" and stabilized the company over night. Instead they spooked advertisers which crippled their only revenue stream, and tried to claw it back with a Twitter Blue subscription that generates a laughably small amount of money.

> Wasn't twitter supposed to stop working by now? They are still functioning, despite the layoffs. Maybe it worked?

It is mostly because the people left are working twice as much, long hours, holidays, weekends. And if you actually use the app, half the things aren’t working. Plus, your argument is more like “I fired the gardener after he tended the yard, it’s been a week, the yard looks just fine. Maybe I didn’t need the gardener?”

Works for me.

>>begging people to come back

I dont believe that every actually happened. The most often cited case of that was the twitter thread about badge access which was proven to be a hoax much like Ligma Johnson Devs. The Media however does not fact check anything so any negative stories are just run with no validation

>>Since Elon's takeover of Twitter, it's been one PR disaster after the next.

Only if you are of a certain political persuasion so you see it as PR Disaster.

>>Mass layoffs

Those were need badly

>>cutting in-office catering

Also should have been cut, and never offered

>>the whole Twitter Blue debacle,

I agree here, probably the only thing we agree on

>>unbanning some of the worst,

This is what has made twitter fun again....

>> trying to fire the previous executives for cause to avoid golden parachutes

Good they should be, they were terrible at their job and should not get any golden parachutes

Reputation matters.

I wonder if any commercial real estate company would rent Twitter anything at this point. It's pretty clear Musk intends to save money by f*cking others.

Might as well go 100% remote.

They will in Texas, FL, or TN which is most likely where the company will be moved to

It’s probably optimistic to assume that whatever engineers are left at Twitter will willingly relocate to Tennessee. Unless you mean that he’ll gut the company entirely and start anew in one of those states?

There are a lot of great engineers in TN who would gladly work at Twitter while getting that SFBA paycheck

Actually Twitter moving to Nashville or Memphis could be the greatest thing to happen to these cities (Memphis more than TN)...if they make it

I agree that plenty of devs in TN would happily take an SFBA paycheck without moving. But why in the world would any company, much less Musk’s Twitter, offer such a massively out of band salary? The entire point of moving to states like TN is to pay less for developers, not the same amount.

>>The entire point of moving to states like TN is to pay less for developers,

that is a consideration, but I would not even put that in the top 10 reasons to move out of SF, or CA.

Hell he could have to pay devs MORE than in SF and it will still be a good business choice to get the hell away from there

I'm not a Californian and I don't particularly want to live in the Bay Area, but I don't understand this reasoning: it doesn't matter how many reasons there are to leave a particular state (of which there are always plenty) if the single biggest reason to stay remains in place. Specifically: the people who live in the SFBA live there because they want to live there, especially if they're still there after the last 3 years.

Unless we're speculating that Musk plans to gut the entire company, it's very hard to sell hundreds of people on relocating across the country.

Yea companies have trouble luring talent from the city just a short hop into near suburbs, let alone across the country.

Isn't that the assumption? Musk will just hire bootcamp grads and whoever sends him a funny meme, and that's it.

It seems there's a sufficiently sized core team left even after all the resignations and firings. He keeps those for a while. They vet and train the new guys and gals.

As long as the site is operational it'll be fine because of the network effects. (Mastodon is great but not really a threat. At least not yet. And maybe never.)

Musk's vendors aren't even getting SFBA paycheques, why would he offer CA comp for TN-based staff?

I would but it'd be like Trumps lawyers: Cash up front only.

Real Estate is a sketchy business. Musk is not going to stand out as an especially bad tenant. And if you dig into the history of these landlords you shouldn't be surprised to find out they have also fucked people over

Quite remarkable levels of whataboutery here. So a generalization like "landlords bad" makes it OK for a business not paying their rent?

Is it "OK" that NBA players commit fouls on each other? Shouldn't they be honorable and just play the ball?

They are desperate for any rent. Landlords for commercial property are getting killed. People are really losing their minds over this but this isn't a big deal.

It is funny to watch the deck chairs getting furiously rearranged.

They're really trying to push back-to-the-office to refill all those vacancies, but at the same time companies that are cost-conscious are going to be realizing that if they can cut their rents then they can maintain staff and operations ahead of their competitors.

Once the recession hits, every company is likely to bolt back to remote work and ditch their rents because it is all pure overhead for only the purpose of bosses being able to observe butts in seats.

The Trump Organization got away with doing this in New York for decades. He'd stiff one real estate developer figuring there was always another who would be star-struck by the "opportunity" to work with him. (He was right.)

Increasingly less so, it seems. After all, the guy that turned stiffing vendors into an art form and lying about his taxes didn't just become POTUS, but pulled in more votes than any other president (besides the sitting one).

Many companies did this during the pandemic- landlords don’t have strong rights.

What would "strong rights" look like? They can pursue violations of contracts, as this landlord is doing.

I think 'strong rights' would be the right to quickly forcibly evict a non-paying renter.

Commercial landlords have all the rights they need in that regard. It’s a contract dispute and a court will order remedies like any other contract dispute. You don’t want to give landlords unilateral powers to interpret and enforce contracts. That would be pretty dumb.

Residential tenants have many more rights than commercial ones

Though for a delay of 15 days nobody will be getting the trucks ready yet

Landlords have very strong rights. They can get tenants evicted through legal means.

They don't need to evict: they can lock the doors and turn power off to all computers.

Commercial landlording is different than residential, but in residential, just changing the locks sets you up for a lot of trouble.

Power would only really be an issue if anything important was running in their offices, but running servers in the office has been unfashionable for quite some time, so I wouldn't expect much if anything to break there.

I will bet my keyboard that every big tech company ends up having some mission critical thing running on a machine in their office. They don't know they have that thing, but it's there and will become apparent when the power is shut off.

Yeah after a lengthy and expensive lawsuit.

You don't have to have an expensive or lengthy suit to evict a commercial tenant... you just can't do it unilaterally. You can go straight to the court and request an eviction, you do not need to sue Twitter to evict them.

How many "eviction lawsuits" have you been involved in?

"Landlord rights" is a red herring here. Companies got away with this because their financial positions changed drastically, and since it happened across the market, so did their bargaining positions. The corporate real estate market seemingly hasn't recovered and is still running on fumes, so it's not surprising similar hardball negotiations continue. It's a bad look and I'm no fan of the chief Twitter addict, but I'd file this article in the meaningless noise about celebrities bin.

They can repossess the building but it’s not like they will be able to re rent it. The office space glut may allow them to re negotiate the contract trump style

Most landlords don’t do this because they find that negotiating with a company to privately and quietly reduce rent and/or leasing space over a negotiated period of time is a much better alternative for all parties.

Musk could have also got the same, but he decided to go fill scorched earth so it will have to go through the legal system instead.

Corporations are not people. Corporations can enter into contracts that humans would be protected from. This is a straight-up contract dispute between corporations. Twitter could get locked out of some of their offices and possibly even data centers, and the contents of those buildings could get sold off to pay down back rent.

Is the calculation just that the cost of litigation will be less than the full contract lease? I don’t understand how that could work.

Musk probably fired the guy in charge of paying rent

Simplest explanation, probably right.

That person was totally unproductive anyway. Just image, they barely wrote a single line of code!

If you fire everyone who knows how to cut a check, your outflows will reduce dramatically.

Well, at least in the short term...

It's cool that HN just turns into baseless speculation around Elon now

I wouldn't call it baseless ...

Indubitably, this speculation is based.

Twitter could just declare bankruptcy and restructure.

I agree this is where things are headed. Is it a sure thing that Elon maintains control in a restructuring?

Usually not. Typically in a bankruptcy the debtholders become the new shareholders and then replace existing management with ones more friendly to their interests.

At which point Musk wouldn't own Twitter anymore, like he wanted. It sounds crazy, but is this his exit strategy?

How does he recover 44B this way?

He “recovers” the value of the loans he defaults on, which could easily be worth more than Twitter at this point.

I dunno, I can think of cooler ways of disposing 44bi $, preferably in a non-reputation damaging way

Breaking apart Twitter would certainly be in the interest of Saudi-Murderabia. For the Saudis, their loan amount is petty change, and they get to destabilize the main driving force behind all major political unrest in the Arabic region and the best and most efficient way to share and spread documentation of government-committed crimes also vanishes.

That wouldn't happen in this case because there would still be residual value in the equity. Is Twitter worth $45bn? No. Is Twitter worth more than the $13bn in debt? Yes.

In this case, they can file, rollover the debt into a new company with no financial loss and then recap the equity with Musk (who obviously has the money to do so) and other shareholders.

Also, the banks who own the debt do not want to run Twitter. All they want is to be able to mark the loan as performing...that is it. In cases where debtholders take over the company, the debt has usually been sold for significantly less than par to someone who wants to run the company. This isn't the case here because the debt is still worth par (imo, largely because it is obvious that a recap would be straightforward...it may be the case that Twitter's financial position is significantly worse, but we will need to wait and see).

Obviously, the question for the leases is how much it is, whether it is worth it, whether the landlord thinks they can get a new tenant (unlikely at this point), and whether the company can be relocated...the lease would have to be a rather large proportion of expenses to make this all worth it...but it may be worth it if the company is going to recap anyway (which seems likely).

> Is Twitter worth more than the $13bn in debt?

This might have been true on October 26th. It's not obviously true today.

> Is Twitter worth more than the $13bn in debt?

The banks who own the debt* do not believe so.

[Edit: early article postulating 20% writedowns https://www.reuters.com/markets/us/musks-banks-book-twitter-...

recent news with 50+% as a more appropriate writedown than 20% https://www.reuters.com/technology/fidelity-marks-down-value...

* because they haven't been able to sell it to anyone]

And look at HY indexes. The marks that have been in the media are roughly where other HY bonds have moved. Banks have bids but they are seeking bids from hedge funds that trade in distressed debt, who are obviously going to bid with a markup (the same thing happened with British corporates a few months, because pension funds had to sell they had to take bids from hedge funds so the bonds went from 100 t0 90 for AAA securities because there was no bid, you had private equity funds trading at 70p in the £1 on money-good securities). The secured portion is down 10%...that looks about right based on HY indexes.

The 50% markdown that Fidelity is taking means that it is worth more than $20bn. Classic HN.

> The 50% markdown that Fidelity is taking means that it is worth more than $20bn.

Care to explain? When the debt is already being marked down, how does the equity have any positive value? (other than maybe extreme variance, but I still don't see how that gets anywhere near 20?)

If you don't understand, this discussion is totally pointless.

Just because someone payed that amount doesn't mean that it's worth it. It's only worth what people are willing to pay, which AFIK is now way less then before musk bought it.

Part of it is that due to the (IMHO absurd to be legal) financial instruments Musk used to loan (part of) the money used to buy twitter, twitter has now a pretty high financial burden. Means it now has to earn much more to be profitable then before. (It was something which you could oversimplified describe as Musk taking out a lone in the name of twitter before being able to represent twitter to buy twitter..., in practice it's more convoluted then that but it's kinda similar.)

Through in the broader picture this specific case of Twitter is more then an indicator for something being wrong, like either impending Bankruptcy, him doing improper business and being very untrustworthy or him crippling the operations department to a point where Twitter has lost overview about what they need to pay where.

If Twitter fell like every other social media, it would have barely been worth $20B when Musk closed the deal. Add the mass destruction Musk has wrought, coupled with the fact that the debt holders have been trying to offload the debt at a discount, and there is a very real probability Twitter, if independently valuated, is worth less than the debt.

Worth more than $13bn to who?

Anybody taking over Twitter will have years of work ahead of them to rebuild trust with advertisers, let alone addressing the core problem of growing user numbers. That was Musk's original job, which is not going well, even after he reinstated pillars of society like Andrew Tate and Trump.

Idk. about the US but normally during a restructuring the company is placed under control of a bankruptcy trustee.

So at least temporary he would lose control.

What are your thoughts on why this is the direction it's headed? What is your experience with dealing with bankruptcy for multibillion dollar companies?

Filing bankruptcy doesn't sheild them from a judge order to empty the building, right?

It does. The rent due under the lease is debt, and creditors cannot take action to collect debt while the debtor is in bankruptcy.

https://www.law.cornell.edu/uscode/text/11/362

https://www.law.cornell.edu/uscode/text/11/365

Edit: here's an easier to read article: https://www.jdsupra.com/legalnews/what-to-do-when-commercial...

It does, but only temporarily. Think of bankruptcy as fundamentally that the debt holders take over, and so a short time is given for everything to be sorted out. Creditors are paid by priority based on lien rights and some policy preferences encoded into the bankruptcy code. Nobody gets to jump ahead in line.

That is what the automatic stay does--it provides the pause to make sure nobody gets to jump ahead in line. As long as the stay remains in place, the landlord (or any other creditor) is forbidden from taking steps to evict a debtor. But it is possible to get relief from the stay if you can demonstrate that you would not be jumping ahead in line, and often relief from stay motions can be heard quickly. If the debtor needs the stay in order to reorganize (the theory being that it is better to have a bigger pie) then the debtor can apply for an extension, but only if it provides "adequate protection," which generally means paying according to the terms of the contract, or supplying additional collateral, or some such.

Timing is important. Once you file, all legal actions against you cease, and that is a very powerful tool. Unfortunately, you can only use that tool once. (Well, if you are a human individual, you get another chance years later.)

That is a very brief sketch. I haven't been a lawyer for years. You can ask a real bankruptcy lawyer for details.

UK perspective: can the landlord not instruct bailiffs to take possession of the building? Change the locks &c. This is distinct from any debts owing except that the non-payment of rent provides the grounds for obtaining a possession order.

I often see the bailiff notices on defunct companies here. There is a standard form of letter that is pasted onto the door. Quite Victorian.

In the US, not during the automatic stay that follows a bankruptcy petition. When filing for bankruptcy notices are sent out to all of the debtor's creditors notifying them of the bankruptcy filing and informing them that they must cease all collection activity against the party in question for the duration of the automatic stay.

The reason why is that the debtor ceases to be in control of their own assets. The assets (and contracts and liabilities etc) become part of a bankruptcy estate that is administered by a trustee appointed to administer the estate in an appropriate manner, such as by liquidating assets and paying creditors in an equitable fashion.

Once the automatic stay is in effect, landlords can petition the bankruptcy court for permission to retake possession of their property, and can't do much of anything until they receive it or the case is closed.

Litigation takes years to play out, paying the lease would result in bankruptcy imminently. Plan is to live another day, long enough to stabilize finances, and then unload it on the public markets where the litigation becomes somebody else's problem.

This is Musk stiffing a supplier for $100k. That seems unlikely to make their bankruptcy any more imminent.

But it does signal (on the record, not just rumours) to literally anybody that Twitter is doing business with that they are distressed, and should be extended no credit. Payment up front, or no service.

Seems a reasonable for a service company with no inputs to COGS that are on credit terms. Payroll is not on credit, and most infra is metal, or on some VP's CC, anyway.

The reasonable signal is yes indeed for Twitter vendors, if you are opex and a long contract, be ready to have our lawyers sit down and hash it out.

it does signal ... that Twitter ... are distressed

Disagree - this is automobile industry tactics where you pay your suppliers late and short because they have no choice. Musk is negotiating for lower rent.

Yep... Ford, GM, and the rest have played that game for years, including just telling suppliers they are now going to pay less for parts.... and since the suppliers have built their business around that one contract there is not much they can do about

> they have no choice

A commercial landlord in downtown SF has many, many choices. The power imbalance here is not even remotely close to the one given in your analogy.

I think you may have missed the last three years. There is currently a very large amount of empty office space in SF.

Litigation takes years, but eviction normally takes much less time.

In some countries delaying filling for insolvency this way is a crime which is hold against the person responsible for it (instead of the company).

So I'm not sure this is the case tbh. but I'm also not sure if this applies here and I don't know the respective US laws.

In the United States creditors can file a petition for an involuntary bankruptcy, which if granted would effectively put the company into receivership and no doubt under less friendly administration than a voluntary Chapter 11 filing.

I have no idea about the contracts, but I could imagine a scenario where Twitter signed a 10 year lease that's expiring in five years or more, and Musk believes / hopes that being enough of an arsehole will lead the landlords to just dropping the contracts instead of risking a multi-year court battle - even if the landlords would eventually win the lawsuit, it will be a risk on their balance the whole time, whereas Musk doesn't have to answer anyone but his creditors about the lawsuit risk.

Creditors can force a company into involuntary bankruptcy proceedings.

Bankruptcy and leases survey:

https://www.jdsupra.com/legalnews/what-to-do-when-commercial...

He's never going to pay and then use it as an excuse to move everyone to Texas.

I mean that's not a difficult or outlandish guess.

One thing is for sure, if Twitter ever is looking for new space they will have trouble finding a commercial landlord willing to lease to them. Perhaps a smaller space in the same area as a larger space they had but closed, this behavior makes it more difficult to do business int he future for them.

Lol no they won't. They are desperate for anyone they can get

It's true that commercial landlords are desperate, but even the most desperate landlord isn't making any money if their tenant isn't paying. That is, unless the business model is "rent to Elon Musk, then make a profit on the lawsuit when he inevitably stiffs you".

This is some sort of dispute, I'm not sure over what but it's not related to solvency.

Not really. Sears and JcPenny's are desperate for customers, but they're not giving stuff away. The 10% return they get from liquidating the inventory and store fixtures.

Same here. Liquidating the vacant property, even at a net loss (which likely wouldn't be the case, if they've owned the property for more than a few years they likely would walk away net positive) would be the best course of action, not giving free rent to a billionaire.

What an inapplicable analogy

Do these lawsuits usually end with a significant punitive fee? If it's just a small, if any part, on top of rent it's a free loan - which is very scammy but similar to tax optimization, what is possible will be done.

Happening in Seattle too (minus the suing), seems like a trend: https://www.seattletimes.com/business/facing-eviction-twitte...

Luckily they don't need an office with their great remote work policy. Oh... wait.

Their policies aren’t exactly written in stone.

Yes, on November 11, it was (https://apnews.com/article/elon-musk-twitter-inc-technology-...) “an email to employees from Musk on Wednesday night ordering workers to stop working from home and show up in the office Thursday morning”, but that was ages ago. Last week, we got (https://nypost.com/2022/12/30/twitter-closing-seattle-office...): “Twitter is closing down its Seattle offices and telling employees to work from home”

> but that was ages ago

I’m not sure if this is really well done sarcasm, but the original article is less than 2 months old.

With the speed at which Elon changes his mind, I think "ages ago" is accurate even if it was less than 2 months ago.

Its not unreasonable if it was 2 hours ago.

Didn't they do that trick of pretending to end remote work to make people resign so they don't have to pay severance?

Elon had leaked tweets indicating exactly this

Pay severance... hahahahah!

https://www.bloomberg.com/news/articles/2022-12-14/twitter-m...

an email at night? does that even count as formal notice of new work schedule? WTF

It wasn't that long ago!

https://news.yahoo.com/twitter-allow-remote-forever-probably...

Their old office was sized for a company 5x larger, of 100% non-remote employees.

It's way too big.

Then it seems like downsizing is a great option. But to just stop paying rent... that's not the same thing.

it should be easy to recapitalize Twitter using sales of Tesla stock, so I cant believe its an actual shortage of cash. Probably trying to game the litigation cycle and pay at the very last minute? But to what end, it seems like a doomed game to play, you either have money coming in or you dont.

With a fraction of the people, they must only need a fraction of the space. Maybe it's some tactic to renegotiate the lease? Though that seems unlikely to work out.

He's very likely to move Twitter HQ to Texas, like he did with Tesla. It would actually be to his advantage.

Tesla stock is down 69% (yes, really) over the past 12 months, and part of what's triggering the price collapse is Musk's own sell-off. When a CEO divests from their company, markets historically do not react with confidence. The more Elon Musk sells, the less value he has and the more stock he'll have to sell the next time that he wants to leverage his wealth to buy something pointless.

Bezos is selling off tens of billions of Amazon stock a year. Amazon stock doesn’t seem to be reacting to it.

I don’t think the market reacted so much to Musk vs the fact that Tesla selling prices have plummeted because it turns out they’ve saturated their market (but until then people believed in the hockey stick growth). It was obviously ridiculous because secondary market sales higher than direct sales cannot be sustained for very long (it indicates you can’t meet supply, but there’s obviously not an infinite amount of supply at the higher price point). That + the collapse of most stocks would account for most of the drop I think. There’s possibly some amount of knock on effect of Musk’s advertised Twitter problems creating a PR problem for him in terms of can he focus on Tesla, Twitter and SpaceX properly. There’s only so many drugs you can take to help you with that.

Bezos isn’t the CEO of Amazon…

Bezos started selling stock while still CEO and remains the largest or one of the largest shareholders. He’s also still the executive chair of the board. If you think that a founder like Bezos selling his shares would have less of an impact than Jassey, I think you’re misunderstanding how this signaling works. In fact, most CEOs will sell shares in specific IRS-approved plans and it means nothing to the overall price.

It can be a combination of things. Beyond Meat shares got hammered. The reasons are diverse: They lost a deal with McDonalds. And they apparently reached market saturation at a much lower level than expected.

Tesla surged pointlessly during the pandemic, as with many stocks. Stock valuations are dropping across the board.

Amazon rallied too, and even though it has 2X revenue and built a large moat since covid lockdowns, their current stock price resembles what it is was in Jan 2020.

Stocks aren't down 69%

> Tesla stock is down 69% (yes, really)

CEO to employee compensation ratio: 420:1

There are good reasons to believe that Musk is running low on liquidity. If Musk took any margin debt at all when TSLA was above $200, that's at risk of margin calls. Published reports say Musk is among the most prolific margin borrowers, with a very high percentage of TSLA shares pledged to margin debt.

On top of that, Tesla's board is at risk of a shareholder suit if it does not enforce its own margin debt policy for board members and top management. Elon's brother is also a big margin borrower, and is subject to a 25% limit.

>Probably trying to game the litigation cycle and pay at the very last minute?

What is statutory interest in SF?

None of this is as interesting as most people seem to think.

Businesses do lots of stuff to negotiate and renegotiate and bully / squeeze / etc. each other.

It will likely be worked out without the lawsuit actually making its way through the court system.

The case doesn't need to be interesting to warrant highlighting. Musk is the person of interest here.

Also, lawsuits are usually a method to force the other party to sit and talk. As an example, Texas law requires mediation before being able to see a judge, including things like divorce. I've heard that between 70% to 80% of cases get settled in mediation (not sure if this statistic is specific to Texas or not)

I don’t know why anyone would think otherwise, but a mediator will simply advise Twitter that they are required to pay the rent. There isn’t a negotiating tactic here that would actually work. A court would order them to pay and damage and costs and fees too.

Short of bankruptcy Twitter or any organization is required to perform their end of contracts.

> Businesses do lots of stuff to negotiate and renegotiate and bully / squeeze / etc. each other.

The United States elected a President who bragged about doing exactly this, so it’s a little odd that it appears unfamiliar to most here.

If only people becoming millionaires on a $180k/year salary would actually write laws and read them before passing.

This just in, Hacker News is now pro-landlord.

California property owners are under attack!

"Twitter, which doesn’t have a media department, didn’t respond to a request for comment."

Twitter is their media department.

Parent is likely making a referencing the fact that Musk obliterated Twitter's employee base to such a majot extent there is literally nobody left in the corporate communications department.

I think the original message is referencing Twitter polls.

Just @ Elon. I'm sure he's got a "banger" reply ready to go

I respect author's self control to add "anymore" to that sentence.

Mid term (2-5 years) it seems like it would be optimal for Twitter to leave SF. Downtown isn't that great to work in and the Elon hate is red hot. They could still keep their SF employees as a satellite office. Bailing on what is surely a very pricey lease is an attractive bonus :-).

Though, it would be hilarious if Twitter's no work from home policy lead to downtown revitalization :0).

I still think SF has a lot to offer startups, but it's no longer essential. Talent has scattered a bit and work from home will continue to drain people away.

Also you probably want to run content moderation from somewhere a little less lopsided ideology-wise. A little more normie like Salt Lake City, Phoenix, or Austin. Ideally a content moderator should be able to have a civil lunch with 80% of the country.

> Also you probably want to run content moderation from somewhere a little less lopsided ideology-wise. A little more normie like Salt Lake City, Phoenix, or Austin. Ideally a content moderator should be able to have a civil lunch with 80% of the country.

Musk fired a significant number of content moderators; I haven't seen any indications that they plan to rehire those roles elsewhere.

Honest question here, do you think Twitter will be around in 2-5 years?

Yes

Seems HN is does not have expertise in this and who holds the cards in the current market in SF.

The lease previously negotiated by the past regime has little relevance as Twitter is currently occupying less than 50% of the floor space.

The landlord has to either accept lower payment, or look for a new tenant and Twitter moves to Austin. Given the current environment in SF, it's likely a new tenant won't be found for years.

That's cool. That doesn't excuse squatting, and a good faith effort requires reconvening at the negotiating table to formulate new terms; not just ghosting and coasting until the landlord engages in litigation, or holding somebody else over a barrel.

In my experience, that is almost never how it works.

Landlords have to take a hard line. They negotiate with a tenant and then the whole building stops paying rent the next week.

The same thing is happening in retail as offices. Rents are, mostly, way higher than the market and landlords are quite happy for that to continue. Eventually the market is going to crack, I think everyone has acknowledged that...but landlords aren't going to be the ones to crack it themselves.

What a completely bizarre interpretation of contract law. Lessors may be in a bind after the lease expires, but during the term of the lease they are entitled to its terms. Nobody can simply stop performing the terms of a lease, outside of bankruptcy.

Enforced how?

Sure you have a contract but you need to enforce it. So you have to sue which takes time - a lot of time.

Then you “win” but the other party can still not pay, or they could appeal - back to court and even more time.

The landlord has an iron clad contract sure - but Twitter has what they want ($) and the leverage as a result.

How does twitter get out of paying short of bankruptcy?

The way you describe it, it sounds like you think he's being smart. I wonder if you and all the others with a similar opinion feel the same about residential tenets who don't pay their rent?

I mean, the article is about the landlord suing Twitter, so the question of how they plan to enforce the terms of the lease seems to have been answered.

Note the landlord here is a big national firm. They're not going to be scared off by having to take things to court, and even beyond the $ at stake, they're pretty highly incentivized not to let customers wriggle out of paying leases just because there'd be lawyers involved in enforcement.

Sometimes to get out of the lease you break the contract. This contingency and associated penalties are often clearly specified in the contract.

That being said, I would bet the article is just lazy journalists trolling for clicks as usual.

I think xqcgrek2 says “has to” in the pragmatic sense.

It likely is true that the landlord can legally force Twitter to pay up, but if that leads to Twitter’s bankruptcy, they won’t get the money.

Also, if they end up with a building that isn’t rented out, they may have to devalue their property and take a huge administrative loss. If their personnel’s bonuses are somewhat tied to their balance capital and/or revenues, their employees won’t want to end up there.

It is a bit of playing chicken. If the landlord thinks Twitter will go down if they play it as hard as possible, they will (grudgingly) accept changes to the lease contract. A common tactic is to decrease rents per m² or decrease the amount of floor space in exchange for restarting the lease period (e.g. if they’re in year 4 of a five year lease period, halve the rent, but start a new five year period). That way, the landlord can (somewhat) declare this as a victory because there’s more ‘certainty’ that the property will still make money in three years time.

The point is they want them to renew the lease. He is likely to move it anyway, if SF keeps harassing him. They recently did inspections and threatened him with eviction.

Odd how enforcing standards is "harassing."

Again, this article is not about their headquarters office on Market St.

My biggest question is: who cares? Lot’s of people in this community (and the media) love to pounce on people and companies who don’t think the same as them. These people/groups talk about being inclusive right up and until the others don’t share their points of view. It’s exhausting

There are 1,000s of companies across the country do this very same thing without any fan fare.

Just stop it!!!

You see the same thing when a Tesla car catches fire after an accident. It's front page international news. I saw an F150 on fire on the side of the highway a few weeks ago. I'm sure there's a large public outcry about Ford as well.

If it was an electric F150 it probably would have been news.

F150s have gasoline, which is known to catch fire. In fact, that's kind of the whole point of gasoline: it it flammable. With a car fire, it is simply that the fire has escaped the part of the vehicle where the fire is supposed to be contained.

EVs are not supposed to catch fire, thus it is news when they do.

Lithium isn't supposed to be flammable but gasoline is in your mind? What kind of logic is that?

Both are flammable and both take as many precautions as possible (with our knowledge) to not be in a car, but still can in extreme conditions (crashes).

The main difference is chemical fires are harder to put out, but you just have to carry the right suppressant.

But with Tesla, yes they make the news than other cars, including other EVs, because... politics.

No, Tesla makes the news more than other cars, including other EVs, because they try to market themselves as the best, safest vehicle but they have substantially worse build quality, abysmal software (i.e., AP/FSD), highest likelihood of being in an accident (whether on an absolute basis or adjusted for market share), and the highest fatality rate of any vehicle in their class (luxury vehicles) compared to all other manufacturers worldwide.

It's not politics, it's people targeting the sheer incompetence and hypocrisy that is Tesla.

Lol ok.

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