It’s quite bad for the business as a going concern and its ability to serve customers and employ employees when it suddenly, and for no obvious reason, takes on tons of debt. Money isn’t free and loans demand payment.
In Twitter’s case, its $13B in new debt on the balance sheet means that, every year, they have to come up with $13B times the interest rate in additional revenue and/or reduced cost merely to be in the same place profit/loss-wise. Elon already massively overpaid what Twitter’s business-as-usual can generate even before accounting for that $13B; as a result, the post-acquisition Twitter has to try a bunch of negative-expected-value moonshots in the unlikely hope that one of them hits against the odds and the others don’t turn out fatal, because doing nothing or iterating sustainably kills the company via debt service.
In a lot of cases the best solution would be for the company to declare bankrupcy, reorganize, and discharge the debt by convincing creditors to take pennies on the dollar and a share of the resulting smarter-run healthier company, and a judge that the plan is reasonable. However, Elon both poisoned that well by firing people, angering advertisers, and bumbling around product-wise, and also staked a bunch of $TSLA that would need to be liquidated to go through with the bankruptcy.
In Twitter’s case, its $13B in new debt on the balance sheet means that, every year, they have to come up with $13B times the interest rate in additional revenue and/or reduced cost merely to be in the same place profit/loss-wise. Elon already massively overpaid what Twitter’s business-as-usual can generate even before accounting for that $13B; as a result, the post-acquisition Twitter has to try a bunch of negative-expected-value moonshots in the unlikely hope that one of them hits against the odds and the others don’t turn out fatal, because doing nothing or iterating sustainably kills the company via debt service.
In a lot of cases the best solution would be for the company to declare bankrupcy, reorganize, and discharge the debt by convincing creditors to take pennies on the dollar and a share of the resulting smarter-run healthier company, and a judge that the plan is reasonable. However, Elon both poisoned that well by firing people, angering advertisers, and bumbling around product-wise, and also staked a bunch of $TSLA that would need to be liquidated to go through with the bankruptcy.