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Comment by lapcat | Hacker News Reader

> Going to be studied by generations as a case study in wiping out decades of brand value overnight.

What is there to study? It's just one childish rich dude with no adults in the room, case closed.

> It's just one childish rich dude with no adults in the room, case closed.

He didn’t do it all with his own money, he took equity investments and debt. A bunch of people had to sign off on this trainwreck, including Morgan Stanley, Bank of America, Barclays, a16z, and Sequoia.

Yeah I do really hope they study that side of it in business schools, to teach young business people and financiers about reputational risk and survivorship bias.

The involvement of the banks was always the confusing part of that deal. Really made me lose respect for their judgement.

> The involvement of the banks was always the confusing part of that deal. Really made me lose respect for their judgement.

Agreed, but to be fair the bank transactions were for debt rather than equity, so they will still end up ahead unless he really does drive the company to bankruptcy. That’s a real possibility, but they’re in better shape than the equity investors who have in one public case[1] already written down the investment 47%.

1: https://amp.theguardian.com/technology/2023/jul/18/twitter-i... (to save you a click: the investor is ARK)

I think that most of the equity investors in the takeover were motivated by politics rather than profit. It was more or less a PAC donation.

Don't the banks have Tesla stock as collateral?

Yeah but I think the debt risk was also way underestimated by the banks. I mean, bankruptcy risk was already pretty high for Twitter under its previous management. The terms of the debt seemed to me to reflect the acquisition reducing that risk, which was insane, and not just in hindsight. I don't think there's an explanation for it that doesn't involve the consumption of a large amount of kool-aid.

The investment bankers lost money even before the transaction completed. Interest rates rose while Musk dawdled and delayed buying Twitter, so the debt lost value (this is the same issue that drove some banks into bankruptcy is the debt they owned - bonds - devalued as interest rates rose). Ordinarily what the investment banks do is sell the debt and then enter into other deals, but with the Twitter deal they either have to take a bath and sell the debt at a loss or keep their money tied up as the debt gets paid off.

I’ve taken a business course in college that covered things like this. There’s plenty to learn by dissecting the many, many levels of failure involved.

I would be most interested to read about that, can you provide a reference or links?

Sadly, no. It was over a decade ago. I don’t remember the cases nor do I have the books or paperwork.

Fortunately, case studies are really easy to find online. Try searching for “case studies in brand management”.

In college, I studied the failed merger between GM and Ross Perot’s Electronic Data Systems (EDS). Essentially a study on egos and cultural incompatibilities.

https://www.nytimes.com/1989/03/26/magazine/gm-vs-ross-perot...

It does really boil down to having a leader with nobody left around them that feels comfortable challenging their view of reality.

Classic situation: too many yes men, needs some real friends who know him and can ridicule his bullshit until he thinks better of it. We all need real friends!

"Here's a really stupid thing someone did in the past, look what happens when you do this, don't do this" is a fairly normal business school thing (I think the classic branding one is New Coke). _Why_ they did it is somewhat beside the point.

> It's just one childish rich dude

I mean, that alone could make for vast magnitudes of study. It's the kind of thing that should lead us to question to nature of public/private companies, for a start.

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