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Comment by dehrmann | Hacker News Reader

This is how death spirals work. Twitter was treading water a year ago. Taking on lots of debt caused mass layoffs, worrying people about site stability and making them investigate other platforms. A lot of bad tweets scared away advertisers, causing more layoffs and desperation. Signed-in users engage more, so make all users signed-in users (no logical fallacies here).

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I’m learning more about the Twitter situation slowly. Why did it take on massive debt?

Because Elon was forced to overpay for Twitter and getting that much money is difficult.

Saying he was "forced to overpay" isn't a fair characterization. As a joke that went too far, he voluntarily offered to overpay at what in hindsight was the peak, then signed a contract making it official. He was only forced to uphold the contract.

Fair elaboration.

Musk did that to finance his purchase.

Leveraged buyout. Twitter is now forced to carry the debt that incurred from its own acquisition

That doesn't make sense. Why is Twitter forced to hold the debt for being purchased and not Elon?

Looking at the numbers that is a lot of debt:

https://www.wsj.com/articles/elon-musks-twitter-takeover-see...

"As part of the deal, Twitter will add about $13 billion of debt. Analysts estimate, based on terms previously laid out in documents related to the transaction, that Twitter would be on the hook for annual interest payments of more than $1 billion, compared with some $51 million in 2021."

> Why is Twitter forced to hold the debt for being purchased and not Elon?

Just because that's what was written into the contract when the acquisition happened. Something different could have been put in the contract, but this is what was actually written in it and signed off on by all the parties to the deal.

That is no different than buying a house with a loan, where the loan is backed by the same house.

Incidentally, has there ever been a leveraged buyout that wasn’t a disaster? Presumably there must be some which are a success at least for the buyer, or people wouldn’t keep doing it, but it really doesn’t seem to have a great track record for anyone involved, as a strategy.

Yes, private equity has been incredibly successful in the last decade. Usually not overpaying to buy a $44 billion dollar company though.

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