How does Twitter earn $44 billion before Elon Musk dies?

by philg

Twitter will soon be owned by African American entrepreneur and investor Elon Musk, who is paying $44 billion for a company that lost $493 million in 2021 on revenue of $5 billion (press release). The company would have earned something like $273 million if it hadn’t had to pay out on a big shareholder lawsuit. So if we look at things in the best possible light, and forget the fact that the government gave all of these screen-based companies a big lift in 2020 and 2021 by making non-screen-based activities illegal (except “essential” marijuana shopping in Maskachusetts and California), it will take 161 years for Twitter to earn $44 billion in profit. Unless the Silicon Valley life extension enthusiasts can deliver, Elon Musk will have died of old age before the Twitter investment pays back.

What could Elon Musk possibly do to make this platform worth $44 billion (other than wait for a few years when $44 billion could be the price of a Diet Coke)? Is the answer that Twitter can become as addictive as Facebook and therefore as profitable, on a percentage basis? Meta earned something like 30 percent profit after taxes. If Twitter could do the same it would earn $1.5 billion per year and Elon Musk would have paid 29X earnings for a company that is slowly growing (in other words, if everything goes perfect at Twitter it still isn’t an obviously good buy at $44 billion). Can we add this to the long list of things about the stock market that baffle me? (Remember that I’ve been skeptical of Tesla stock and Bitcoin for about 10 years, which is nothing to brag about in the investment world.)

Let’s look at some fun stuff from Twitter regarding Twitter….

Jeff Bezos says that it is good when a billionaire owns Atlantic magazine (Laurene Powell Jobs, who made money by marrying Steve Jobs, and promotes low-skill migration) and it is, presumably, good when a billionaire owns the Washington Post (Jeff Bezos himself). But it is bad when a billionaire owns Twitter:

Here’s a look at the likely thoughts of the Twitter Thought Police:

Here’s a chart of enthusiasm for censorship by party affiliation:

A summary of the situation:

Suppose that Elon Musk cancels the cancelers who work at Twitter. The folks who permanently suspended Donald Trump, for example, would have to look for other work. What if they re-formed as an independent company that took the entire Twitter feed and bowdlerized it by filtering out anything from the New York Post, vaporizing anything that says something positive about Donald Trump, etc. This would become a cherished safe space for Joe Biden voters. What to name the site? How about SafeTwit?

25 thoughts on “How does Twitter earn $44 billion before Elon Musk dies?”

    • Phil, if you are such a free speech advocate why have a comment moderation policy?

    • TS: That’s a great question! It is from experience with photo.net where the discussion can get derailed if people start attacking each other and that tends to drive away those with the most interesting points of view. So the comment moderation policy is not designed to prevent someone from highlighting a New York Post article about Hunter Biden, but rather to prevent Reader A from saying “Reader B is a pinhead”.

      Under my comment moderation policy, all of the people who’ve been unpersoned by Facebook and Twitter would still be authorized users and, generally, they wouldn’t have had anything censored because they’re mostly starting their own threads.

  2. Well, on the one hand it is fitting that a nonprofit like Twitter be taken private. On the other hand, Musk has contributed electric cars and reusable spaceships to mankind, it would be a shame to waste his attention, energy and talent on a useless dumpster fire like Twitter.

    • Fazal: my friends who are scientists (science v.2019, not Science v.2022 in which it is unnecessary to formulate and then test a hypothesis) rely on Twitter for finding nearly all the latest information in their respective fields. So I think Twitter does have a legitimate use case, even if the users aren’t worth targeting by advertisers (the spending power of a biology post-doc is no higher than what someone could obtain by having sex with a hard-working dental hygienist and harvesting the resulting child support (see http://www.realworlddivorce.com/ChildSupportLitigationWithoutMarriage )).

    • Even for non-professional science dilettantes like myself, twitter is a wonderful resource. I follow various professor/postdoc/grad student types in sundry fields on twitter. It’s a most convenient way to learn about the upcoming workshops, talks, society meetings etc.

    • Controlling the science narrative is worth more than 44 billion dollars. Throw in all the other thought controls and 44 billion is a bargain.
      None of the stated reasons or published numbers are real. The real reason is gatekeeping thought. If you control where scientists get their info it doesn’t matter what they discover the scientists only learn what you want them to.

  3. Philip, I followed the take-over battle not in great detail, but Elon Musk analyzed Twitter following and business and presented it to the board. He showed that people with most followers were dormant as of recently, and many with millions of followers left. If left-leaning investors found his business case compelling I think that Elon Mask has a plan how to flip Twitter revenues into positive territory so his bet will pay off in 10 years or so. It is not easy to get consistent growth on dormant $44 billion and I am sure he is planning to beat S&P 500 over next decade or so. And he has an option to float the share back when market turns bull.

  4. I don’t know how he ever makes any money with it, but it sure looks like he’s touched off World War IV.

  5. If any of the debt used to buy Twitter is ever repaid it likely won’t be in real cash dollars, but rather in “payment in kind” (PIK), ie: repaid with new debt, or with newly issued shares (except the 3-7% bankers fees always paid in cash).

    > In leveraged buyouts, PIKs is used if the purchase price of the target exceeds leverage levels up to which lenders are willing to provide a senior loan, a second lien loan, or a mezzanine loan, or if there is no cash flow available to service a loan (e.g., due to dividend or merger restrictions). It is typically provided to the acquisition vehicle, either another company or a special purpose entity (SPE), and not to the target itself.

  6. > Twitter will soon be owned by African American entrepreneur and investor Elon Musk

    So we are OK to call Elon Musk an “African American” because he is born in Africa but yet he is white? Is this accepted by the black community?

    • TS: Per the above discussion about comment moderation policy… you’re free to express the heretical point of view that some people don’t and/or shouldn’t care about BLM. If you’d said that George was an idiot even for asking the question, that could trigger moderation.

  7. When you’re the wealthiest man in the world, everything becomes about power and influence. Why would Musk even care if he recuperates the $44 billion? Remember that ABBA song? Money, money, money, must be funny, in the rich man’s world….

  8. I started looking at Twitter a couple of months ago and it seems to me perhaps the best news source. So if you want for example to know what is going on in Ukraine Twitter seems a lot more informative than anything in legacy media. On other subjects that interest me, too. Would I pay for it? Probably, especially if it were improved so some of the junk and repetition were filtered out. As for Musk, I sure hope he is successful since he has a lot of courage and seems made of similar stuff as the great US entrepreneurs of a century ago. I think a lot of the criticism of him is just envy, a powerful albeit pathetic human emotion. He’s probably driven not by money but by the possibilities of the future: https://www.youtube.com/watch?v=s1i3dB2qWbA

  10. It is interesting that everyone is concerned about the Chinese government, when Musk already seems to have excellent ties with the U.S. government (Tesla/Space X subsidies and contracts, Starlink). This article lists a number of ruthless monetization possibilities:

    https://www.wired.com/story/elon-musk-twitter-privacy-anonymity/

    Overall, the move is positive though. We’ll have to see if the censors are cancelled and start a competitor.

  11. Let’s say I buy a perpetual bond, a consol. Assume it pays a 2% coupon, based on the price I paid. Even though I won’t live for 50 more years, I can sell that bond to a younger person, who in turn can sell it when the time comes.

    That’s why it might still make economic sense to buy a company that pays minimal dividends in your lifetime.

  12. We’re all tied to the Chinese government. If we don’t support them to some extent, no more food.

    The lion kingdom believes Elon is most likely to turn it into the next Goog or Apple, easily a $3 trillion valuation in private equity & another 20 rounds of quantitative easing. Having said that, he could get bored like he did with solarcity & make it public again. If it loses 1/2 of its value, the economy has bigger problems.

  13. Since when does a company need to make money to increase valuation?

    Just because you failed / missed timing w/ photo.net doesn’t mean Musky can’t sell it for a dollar more in a year and turn a profit.

    • baz: We sold photo.net in 2007 and I have no complaints about the price, especially since I didn’t start it with the intention of making money. I like to say that this was the last intelligent decision that I made. About 1.5 years later, I asked a pilot friend who is an expert in tech M&A what the enterprise would be worth at that moment. He responded “nothing.” (He’s a billionaire now, so by the standards of American journalism must be extremely wise. See https://people.com/human-interest/bill-gates-wife-melinda-secret-happy-marriage-25-years/ for example.)

  14. Twitter just admitted what many already knew but couldn’t prove: they’ve lying about their user counts; in this case an over-count of at least 1.9 million users.

    Add in government and business accounts, and the many “bots” and the question is really, how many actual humans who are not paid to be there, are on Twitter?

    And what does this say about the CEO, who supposedly came up through the tech side of the business…?

Comments are closed.