Elon Musk is said to have told lenders he’ll slash executive pay at Twitter and monetize tweets to make the firm more profitable before buying it for $44 billion.
Musk is said to have made the vow to banks before securing funding to buy the firm, with the deal announced Monday.
Currently, Twitter spends about $2.9 million in cash and stock awards to board members, according to a filing.
But the firm’s top executives receive far more annually, and could also find their pay in the firing line.
CEO Parag Agrawal only took over in November, but is set to earn a cool $30 million in 2022, thanks largely to $29 million of stock options he was given as part of his promotion.
Reuters reported that Musk already has Agrawal’s replacement lined up, but did not say who it will be.
Agrawal, who took over from co-founder and former CEO Jack Dorsey, has a ‘Change in Control’ clause in his contract, The Hollywood Reporter said, citing Twitter’s most recent proxy filing.
That would mean he receives a $38million payout if he’s fired.
And Vijaya Gadde, Twitter’s chief legal officer is also likely to face a huge pay cut – if she stays.
She earned a salary of $600,000 last, year, as well as a whopping $17 million in stock options. Musk has already taken Gadde – nicknamed the ‘moral authority of Twitter’ to task for censoring factual stories about Hunter Biden’s laptop.
His total compensation for 2021 was $30.4 million, according to Twitter’s proxy, largely in stock awards.
Dorsey is in line to receive a $978 million payout after Musk bought the social media network he created.
He owns 18,042,428 shares in the firm – equivalent to 2.4 per cent of the company – which Musk will now buy for $54.20 each, netting him close to a billion dollars.
The current chair of the board, Bret Taylor, is in line to receive a cash payout just over $3 million when the deal goes through.
He could also face being ousted.
Musk made the pitch to the lenders as he tried to secure debt for the buyout days after submitting his offer to Twitter on April 14, the sources told Reuters.
His submission of bank commitments on April 21 were key to Twitter’s board accepting his ‘best and final’ offer.
Musk had to convince the banks that Twitter produced enough cash flow to service the debt he sought.
In the end, he clinched $13 billion in loans secured against Twitter and a $12.5 billion margin loan tied to his Tesla stock.
He agreed to pay for the remainder of the consideration with his own cash.
Musk’s pitch to the banks constituted his vision rather than firm commitments, the sources said, and the exact cost cuts he will pursue once he owns Twitter remain unclear.
The plan he outlined to banks was thin on detail, the sources added.
Musk has tweeted about eliminating the salaries of Twitter’s board directors, which he said could result in about $3 million in cost savings.
Twitter’s stock-based compensation for the 12 months ending December 31, 2021 was $630 million, a 33 percent increase from 2020, corporate filings show.
In his pitch to the banks, Musk also pointed to Twitter’s gross margin, which is much lower than peers such as Meta’s Facebook and Pinterest, arguing this leaves plenty of space to run the company in a more cost-efficient way.
Bloomberg News reported earlier on Thursday that Musk specifically mentioned job cuts as part of his pitch to the banks.
One of the sources said that Musk will not make decisions on job cuts until he assumes ownership of the company later this year.
He went ahead with the acquisition without having access to confidential details on the company’s financial performance and headcount.
Musk told the banks he also plans to develop features to grow business revenue, including new ways to make money out of tweets that contain important information or go viral, the sources said.
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