Elon Musk Doesn't Want You To Get Too Attached To Twitter's New CEO

Musk proves he's not interested in anyone else actually running Twitter or making it safe for key advertisers or even breakeven so his wary bankers can offload to investors a refi of its crushing debt

Linda Yaccarino has started her new job as Twitter’s CEO. Too bad Elon Musk probably won’t actually let her do it.

• New Twitter CEO is only days into her new job and there already are warning signs she and Musk are bound to clash.

• Musk demonstrates he's not interested in anyone else actually running Twitter or making it safe for key advertisers or even breakeven.

• Bad news for all of Twitter's stakeholders, including its wary bankers still unable to offload to investors a refi of its crushing debt.

There’s no question Twitter TWTR 0.00%↑ desperately needs new management. Elon Musk’s “strategies” have wiped out at least two-thirds of Twitter’s equity value since he bought it last October. That’s according to the latest filing by Fidelity, a pre-Musk Twitter investor who holds the equity in its Fidelity Blue Chip Fund.

It’s hardly surprising. As I observed in Elon Is "Saving" Twitter To Death:

It took less than a month for Elon Musk to transform Twitter from a flawed but functional company with a slowing revenue problem to a disaster on the brink of bankruptcy.

The speed of the carnage has been shocking, even for those of us who long have chronicled Elon as a terrible manager and a worse boss with no credible plan and no accountability for his actions—the worst possible combination.

Since then Musk has reportedly fired nearly 90% of Twitter’s employees, leaving it with a skeleton crew of roughly 1,000 and seriously vulnerable to increased platform failures plus growing safety and compliance risks like viral tweets showing child sexual abuse, live-streamed shootings, and the torture and murder of dogs and cats (some of many discussed here, here, and here).

This on top of the continuing increase in the spread of hate speech—much of it, as I have warned for years, from Elon Musk himself who long has used Twitter to attack marginalized groups, regulators, employees, whistleblowers, scientists, liberals, critics, and anyone he doesn’t like (see Elon Is Scared Poopless Of Us and Dear Elon: There's Nothing Funny About Hitler).

At the same time, Musk has restored Twitter accounts of long-banned racists and hatemongers. He’s given a show to king of hate Tucker Carlson after he was fired by Fox News when the network was forced to settle for $787 million after willfully spreading and endorsing dangerous misinformation about the US 2020 election which harmed voting machines maker Dominion. Business Insider observed that “Elon Musk's free speech town square feels more like a mob heist” to promote hard right wingers.

His stock answer to concerns and complaints: a poop emoji.

As iconic Ben & Jerry’s warned last month when it announced it has stopped all ad-spending on Twitter:

We’ve watched with great concern the developments at Twitter following Elon Musk’s purchase of the social media platform. Hate speech is up dramatically while content moderation has become all but non-existent. In addition to the changes on the platform that have led to an increase in hate speech, Musk himself has doubled down on dangerous anti-democratic lies and white nationalist hate speech. The platform has become a threatening and even dangerous space for people from so many backgrounds, including people who are Black, Brown, trans, gay, women, people with disabilities, Jewish, Muslim and the list goes on. This is unconscionable in addition to being plain bad business.  
Ben & Jerry’s press release, 5/23/23

And yet, at the height of this crisis, Twitter’s head of Trust and Safety has just resigned after only 7 months, joining the exodus of managers who have grown frustrated with Musk doggedly burning the house down around them. As Rolling Stone reported:"

After Elon Musk decimated the social media company’s Trust and Safety Council — which was comprised of about 100 independent civil rights leaders and advocates from around the world — the Tesla owner installed Irwin as VP. Taking the helm, Irwin was tasked with mitigating harmful content such as hate speech, and keeping users safe from fraud and abuse with a gutted staff.

Still, those of us who have followed Musk for years are hardly surprised given the persistently similar calamities observed at all his companies as well as the fact that he can’t—won’t—keep talented management his companies desperately need.

As I wrote about stubbornly persistent troubles at Tesla TSLA 0.00%↑ back in 2019:

These problems are not new, so why are they still happening? Managers who can't make effective and sustaining changes to fix Tesla's problems don't stay. This is, no doubt, due largely to Elon Musk's entrenched and clearly autocratic management. He doesn't listen to advice or suggestions, he doesn't like criticism, and he really hates rules (right SEC?). Musk doesn't follow rules, and he eliminates those who don't follow his rules.

The Trouble With Tesla’s Arrested Development

So, predictably, Musk is killing Twitter.

Advertisers fled in droves almost immediately after Musk took over, especially major ad-buyers who accounted for some 90% of Twitter’s pre-Musk revenue (see Elon Is "Saving" Twitter To Death). That ad spend is still gone or drastically reduced—because of Musk.

No wonder consolidated revenue has plunged accordingly, leaving Twitter insolvent and bleeding cash despite Musk hacking costs almost indiscriminately. Now Twitter can’t even pay normal operating bills, much less support its $13-15 billion in debt Musk layered on to buy the company plus likely maxing out its banks lines (see Twitter Equity Worth $20 Billion? Guess Again).

Meanwhile, Musk’s ideas to boost sales have failed miserably and there’s little confidence from his most important stakeholders he can ever turn it around himself. His much ballyhooed launch of Ron DeSantis’ presidential bid crumbled immediately into a catastrophic technical failure.

No wonder Twitter’s banks are still losing hundreds of millions of dollars as they continue to be stuck holding all its debt nearly 8 months after the deal closed because they still can’t sell it to wary investors (see Twitter Equity Worth $20 Billion? Guess Again).

As I last warned last November:

When I say Twitter's bankers really, really want to unload the $13 billion LBO debt arranged back in April for Elon’s LBO of the company, it's not just because they already were losing more than $500 million before Elon closed the deal in October because interest rates had spike to multiyear highs.

It’s also because Elon is blowing up the company so quickly and so destructively that they couldn’t sell that debt even for 50-60 cents on the dollar. Now they are headed into year-end stuck with the largest chunk of merger debt overhang (left unsold) with 30% of the total $42 billion all US banks are trying to unload at a loss by year-end, as reported by Bloomberg.
Twitter’s Banks Are Stuck With Largest Chunk Of Unsold LBO Debt.

And again in December:

So, the banks are probably not interested in loaning Twitter even more cash now that Elon has run the company so rapidly toward bankruptcy with little chance of recovery any time soon.

The banks also have a close-up view of Twitter’s finances right now. That’s because banks get far more comprehensive operations information and other critical financial details from their borrowers and they get it every month. So the banks already know how much trouble Twitter is in, and whether it can recover any time soon. Knowing what they know, they want out—as I have suspected for a while.

How can they reduce, if not eliminate their exposure to the Twitter dumpster fire?

They want Elon to buy back at least some of Twitter's LBO debt. Bloomberg reported last week that the banks are interested in having Elon buy back the riskiest and most expensive piece: the $3 billion in unsecured bonds the banks had capped at a 11.75% rate—before market rates spiked as high as 17% before the deal closed and before Elon had rendered Twitter insolvent.

Makes sense. I suspect the debt the banks tried—and failed—to sell was the most appealing senior secured debt, with the unsecured debt now (as then) likely worthless (along with Twitter’s equity). And I doubt Twitter can even afford to pay the interest costs on the secured debt, much less the estimated $1.29 billion due per year (including $352.5 million for the proposed $3 billion in unsecured bonds).

The banks reportedly want Elon to replace at least the $3 billion unsecured bond with a new margin loan backed by pledging even more of his Tesla stock. To that, Elon might bargain, for example, that he will buy back some or all $6 billion of the proposed bonds—at a severe discount like, say, 30-50 cents on the dollar (still likely more than the company is worth now). And the banks probably should take that deal.

Elon Sold More Falling Tesla Stock. Margin Calls? Twitter Failing? Bank Demands? Likely All Three.

It’s not just Twitter’s bankers who are worried. Top pre-Musk investor Fidelity just marked down the price of its Twitter equity for the fourth time since November to now just 33% of Twitter’s exhorbitant purchase price.

Which, I have estimated, is still too high (see Twitter Equity Worth $20 Billion? Guess Again).

Linda Yaccarino/Photo: Sky News

This is the mess Linda Yaccarino has willingly stepped into.

To be clear, Yaccarino seems more than qualified to run Twitter. After 20 years with Turner Entertainment, where she rose to Executive Vice President/COO Advertising Sales, Marketing and Acquisitions, she then moved to NBCUniversal 12 years ago where she managed its $13 billion ad business as Chairman of Global Advertising and Partnerships with her 1,500 person team.

In short, Yaccarino is notably accomplished with decades of strong and lucrative ties with the vital advertising relationships Twitter desperately needs. She has strong business credentials as a producer of substantial revenue and profit for a much larger media organization. She’s even reported to be politically aligned with Musk—without the apparent wacko component Musk exhibits.

She’s the right medicine for the worst of Twitter’s ills as much as Musk is Twitter’s worst nightmare—as the world already knows.

And, if history proves correct, I expect Musk will disdain her for it.

Yaccarino is smart enough to see the warnings already there, starting with Musk publicly outing her as his pick for Twitter CEO before she was ready or had discussed it with NBCUniversal. Indeed, she was days away from making her presentation as NBCU’s ad chief at the company's annual Upfront presentation to advertisers—its most important of the year.

Musk’s premature announcement hastened her departure from NBCU—and vaporized her options.

Then, when she was locked in, Musk triggered public outrage over his tweeting of more anti-Semitic attacks against billionaire philanthropist George Soros.

When called out for it on CNBC, he bragged that he will say what he wants on Twitter, even if it loses him money.

That is Musk broadcasting to all of Yaccarino’s valuable advertisers and any other interested parties that she is not in charge, so they can forget about trusting anything she promises about Twitter’s commitment to protecting their brands.

And just days ago Musk tweeted “Looking to hire a VP of Witchcraft & Propaganda.”

“When someone shows you who they are believe them the first time.”

―Maya Angelou

Stay tuned.

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