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Twitter financiers consider new margin loans: Report

Yahoo Finance's Akiko Fujita and Rachelle Akuffo discuss reports that Elon Musk's backers are continuing to support his Twitter venture.

Video Transcript


- Elon Musk has been contending with a myriad of issues since taking over Twitter. Now one is the somewhat controversial financing structure of the deal. Now Bloomberg News reporting that Musk's bankers are considering providing the billionaire with new margin loans backed by Tesla stock. Now this would theoretically replace some of the high-interest debt currently on the books. This would replace the $3 billion of unsecured debt, which Twitter is paying 11.75% interest on [? Akiko. ?]

- Yeah. And when you think about it, I mean, the initial financing package did include marginal loans that were backed by Tesla stock. So in some ways, this is kind of going back to looking at that-- obviously, that was ultimately replaced by additional equity from investors. But bottom line, this is all kind of in an attempt to ease the debt load for Twitter.

And you pointed out the interest that they're paying on right now, the loans, we're talking about $1.2 billion. I mean, that's more than-- when you think about the revenue that Twitter is pushing out. And it all comes at a time when they are really struggling. You think about the advertisers who have suspended ad buys on Twitter. We've, of course, been talking over the last several weeks about the pullback that we have seen, or the cuts, we should say, thousands of employees that have been cut.

And that's kind of put Elon Musk in a bit of a tenuous financial position, where you've got $1.2 billion in interest that you have to pay on these loans that have been secured at a time when the company really isn't seeing that steady revenue. I mean, you could argue Twitter was already struggling even before this deal, but certainly, that has been exacerbated by advertisers really pulling back.

- And we know that ever since Ellen took on Twitter, People were wondering, what does this mean for some of his other businesses? What does this mean for Tesla? A lot of investors probably not very impressed right now seeing this continuing to come up and continuing to be a problem as he's trying to prop up Twitter. But this is what happens when you start a comment with a tweet, that you're thinking about buying Twitter. And now look at the debt financing that has to go on now.

So this is going to be an ongoing situation. I'm not quite sure how Elon is managing to balance all of this. The banks, you know, they're still stepping up here. They still seem to have some faith in what he's doing. But as we remember now, this is a private company. He's making a lot of very public decisions, putting a lot of things to pose, even if it's at the cost of advertisers. So it's a tough line to walk for Elon right now.

- Yeah. I mean, with Tesla-- I mean, you put the loan aside. It is about the concern about distraction, right. When you think about where Elon Musk is putting his attention, is this going to take away from Tesla? And Twitter, again, the bottom line for the platform, which has been a question for many, many years, which is, how do you bring in additional sources of revenue when this is a model that was based on 80% or more of the revenue coming in from ad buys?

And of course, it's not just about the controversy that Elon Musk has brought to Twitter. I mean, we've seen a broader pullback in ad buys overall, especially on social media right now, as we've seen the economy slowing down. So something that we're going to continue to watch, obviously. But Bloomberg, which put out the story, saying that this is still in the very, very preliminary discussions. Nothing has been set in stone. But we, of course, will continue to follow that.