A question about Musk and Twitter in particular and business debt in general

[dsc]

I have heard commentators posit that Musk is purposely trying to make Twitter crater in value so that he can buy up his own debt the value of which would also supposedly fall. That is where I am lost. I owe about 200k on my house, I fail to see how having my house drop in value to 50k makes me able to buy my mortgage for a lesser amount. What am I missing?

[Walleye]

1. Someone once explained that to take $100 and make it into $110 is very difficult

To take $100 million and make it into $110 million is practically inevitable

[Bernardo de La Paz]

4. Yup. Umbrellas, and related to: $10,000 loan default is your problem, $10 million: bank's problem

Common saying, sometimes falsely attributed to Robert Frost and Mark Twain:

A banker is someone who will lend you an umbrella on a sunny day and demand it back when it rains.

https://quoteinvestigator.com/2011/04/07/banker-umbrella/

[Walleye]

5. That's a good one, I hadn't heard that for some reason

[Emrys]

6. That person had obviously never encountered Donald Trump! n/t

[Walleye]

9. Or Elon Musk apparently

[Bernardo de La Paz]

2. You've got it right. It's a stupid theory. Also, Twitter woes driving Tesla down.

Musk is the first person to ever lose more than $100 billion of wealth. Of course he still has about $200 billion.

[ok_cpu]

3. Seems really risky and not likely to succeed

but I think Musk used a lot of investor money to take Twitter private. I can't imagine it working, but I suppose they could be speculating that the value could drop enough that he could use his own money to buy out the investors and take it from private to closely held. Seems like the financing structure wouldn't allow it or he'd get sued into oblivion.

Like the scenario you mentioned with your house. "If" you would be wiling to go to foreclosure, and "if" you could buy your house back at auction, and "if" the lender didn't pursue you for a deficiency, you could in theory buy your mortgage for less than you owe now. Lot of ifs and would never happen, though.

[Emrys]

7. Musk's also burned a lot of reputation.

I'd expect he'll find it far harder to find backers for future endeavours.

[Jerry2144]

8. Mar a Largo

You will never find a more wretched hive of scum and villany.


It’s an apt appellation

[unblock]

10. It's not exactly the same thing, but

If you go bankrupt or are otherwise very unlikely to pay your debts in full, you can settle with you lenders (one way or another) for less than the full debt.

But a key difference is that typically (I don't know the details of this particular deal, just these deals in general) *twitter* would owe the massive debt, not musk personally. When you buy a house or a car, *you* are on the hook for the debt even if the asset becomes worthless.

So if Twitter looks unable to repay its debts, musk is able to step in as a still very wealthy person to rescue the company for the mess he put it in. Pay the banks 40 cents on the dollar when they think it's only worth 30. Then he owns Twitter debt-free.

*then* he starts running Twitter well and makes another fortune.


Crap like this happens all the time. Deliberately? Sometimes, I'm sure, but good luck proving it.