The $44 billion that Elon Musk paid to acquire Twitter was primarily viewed as an overleveraged investment.
An overleveraged purchase occurs when a person or company incurs a high degree of debt in relation to the worth of an asset they have acquired through borrowing.
If the asset’s worth doesn’t rise or if the business can’t make enough money off of it, the loan payments may become too much to handle.
Overleveraged purchases can be a major contributor to financial stress and even bankruptcy.
Here, Twitter is the asset, and if it doesn’t start making enough money, Elon Musk will be in the wrong spot.
Musk has taken a number of measures to reduce costs for the company since he took charge, including laying off half the workforce. It seems, though, that this is not all he has done to save money.
The New York Times reports that for weeks, Twitter has not paid the rent on its headquarters. The building’s owner is currently accepting rental applications.
The Twitter headquarters in San Francisco and the Twitter global office are both mentioned in the report.
Shorenstein, an established real estate firm, is the proud owner of several commercial spaces.
Twitter allegedly received complaints from Shorenstein demanding rent payment.
According to recent posts, musk is using his Twitter account to renegotiate the lease. Musk has also taken heat for putting bedrooms at Twitter’s headquarters.
There have been a few good years for Twitter, Inc. Now Musk must face the difficulty of making money from his social media program.
Model of business used by Twitter
Musk plans to make money in the same way that Amazon and Netflix do: through a membership service.
Up until recently, advertising has been Twitter’s primary revenue generator. Earning money through advertisements is key to the company’s business plan.
Twitter makes money when advertisers pay the firm to promote its content to Twitter users.
Businesses and organizations that use Twitter to communicate with their customers and audiences can also take advantage of Twitter’s complementary services, such as data analytics and customer care capabilities.
Source: Republic World