Why Elon isn’t paying his bills?

“Obviously Elon can afford to pay Twitter’s bills: it’s couch cushion money for him. So he must have a reason for not doing so, which of course he’s not sharing.”

Puck’s William Cohan asks the question that is on the mind of many: why is Elon Musk not paying his bills? He owes rent money to Twitter landlords. He is stiffing Joele Frank, the PR company that helped him during the takeover, and he is refusing to pay his Google Cloud bills and even the arbitration administrator dealing with Musk’s legal disputes with former Twitter employees. The answer to Cohan’s question is right there in the story.

Musk, once again, is taking a page out of Donald Trump (again). Trump often used bankruptcy to stiff his creditors. Musk wants to do the same to the Wall Street banks  — he bought Twitter for $44 billion: $24 billion of his own money, $7 billion from others, and $13 billion in debt from various banks, including JP Morgan. His interest payments are about $300 million — he has paid out $600 million so far, and the next one is due in September 2023. The banks can’t sell that debt — Elon has done a great job destroying what was already an overpriced company.

In fact, the Twitter buyout may be one of the very worst acquisitions in the history of Wall Street, with something like $37 billion in value flushed—the $31 billion of equity and about half of the value of the $13 billion of debt, or another $6 billion—pretty much as soon as the deal closed. Wall Street banks that still own the $13 billion of senior debt to sell it to other investors, unless they are willing to take a huge writedown—on the order of 50 percent—to move the debt off their balance sheets. At some point, the Federal Reserve, the banks’ prudential regulator, is going to force them to sell the debt, perfect their losses, or to take a serious impairment charge against the debt and perfect that loss. By not paying his bills as they become due—so that he can scare the big Wall Street banks that own Twitter’s $13 billion of debt to sell it to him at a steep discount. 

By getting the banks off his back — remember, they charge him $1.2 billion a year in interest payments —he might offer them a few billion upfront and get them off his back. He won’t like to lose Twitter to bankruptcy — he needs to control his propaganda network. 

He needs Twitter not only for his ego but also for his business. Twitter keeps people from asking tough questions about Tesla’s dependence on the Chinese market for its future growth potential. It allows Musk to maintain power over American politicians (or anyone else who opposes him.) The man is trying hard to become Rupert Murdoch of the Social Network Age.