Elon Musk has to find over a billion dollars a year to cover interest on the debt he’s incurred in acquiring Twitter, from borrowing directly, and interest on margin loans he’s taken against Tesla shares. Twitter doesn’t make that much. And its revenue has taken a hit from advertiser pullback. He needs to find both revenue and cost savings.
The Twitter culture also fundamentally doesn’t match the Musk-driven company culture. He works insane hours with unbelievable dedication to the causes he commits himself to, and he expects the same (or something approximating it) from those that work for him. He doesn’t like meetings, bureaucracy, or waste. He likes doing things and breaking things and pushing aggressively.
So in laying off staff he isn’t just trying to make Twitter more efficient, he’s trying to remake the company culture, hoping that those who remain are more grateful and willing to work harder. Anyone staying is told the conditions under which they’re still there.
Part of both remaking the culture and shedding costs is unloading non-personnel expense, both for the immediate savings and for the symbolism. He’s reportedly stopped paying office rent, trying to renegotiate leases.
Musk’s twitter has reportedly refused to pay some bills for services provided in the last days of previous management – like a $197,725 roundtrip private jet flight from Teterboro to San Francisco for the executive who served as the company’s Chief Marketing Officer and head of HR the day prior to close of the sale of the company.
The Twitter executive might have chosen one of 21 flights between New York and San Francisco offering flat business class seats instead.
- New York JFK – San Francisco is served by a dozen flights a day across Delta, American and JetBlue offering a premium business class (so excluding Alaska’s four flights).
- United alone offers 9 daily Newark – San Francisco flights with flat seats (again we ignore Alaska’s service for this purpose).
Is Musk justified in being mad? Is he justified in not paying?
- Lavish spending quite reasonable chafes Musk. Remember that, despite doomsaying predictions, Twitter is still running despite shedding two thirds of staff. They’ve eliminated meals meant to keep people in the office, who largely weren’t in the office, and many of whom weren’t working so hard they couldn’t leave the office had they been there to begin with. Much furniture is being auctioned off.
Here’s private jet travel he’s being asked to pay for, nearly 200 grand for a roundtrip transcon ‘because the trip was urgent’ as though the executive couldn’t have taken a commercial business class flight. They’re spending his money and he likely takes it as gratuitous, at the last minute when it was going to come out of his pocket and he’d have no way to stop it.
- He’s found a technical loophole to at least argue an out. The trip was booked by someone not authorized under the charter services contract to obligate Twitter to pay.
Twitter and PJS signed an agreement in June 2020 to allow Twitter to book charter passenger transportation services through PJS. …It states that the agreement requires Twitter’s “designated representatives” to book its services, but in practice, Twitter’s process of booking strayed from the agreement on numerous occasions, as employees other than the designated representatives often booked the flights.
- That’s still probably a stretch. While it’s a technical violation of the contract, the trip was booked and taken by a Twitter employee who themselves would have been able to obligate the company. The service was actually provided to the company. And, apparently, it was literally signed off on by the then-CEO.
Moreover, Twitter in practice had people other than designated representatives booking private jet travel. They regularly paid those bills. It’s a breakdown in twitter’s processes, more than the private jet charter company’s, and they’ll argue that Twitter will be estopped from arguing that they shouldn’t be obligated to pay under the circumstances since they created the precedent.
Refusing to pay for an executive’s private jet travel sends a signal about lavish spending at the company. Getting sued for the $200,000 roundtrip is almost better for Twitter under that scenario, since it makes the decision very public in a way remaining employees see it. In fact, even if Twitter winds up paying the bill plus legal expenses it’s probably cheaper than any other way of getting that same message across. Of course it may make vendors wary of doing business with Twitter.
Twitter seems to have been fairly bloated. That’s not uncommon in a medium-to-large enterprise, especially in tech. On the one hand Musk needs that to change for financial reasons. On the other, he’s reportedly negotiating to buy back much of the debt issued to fund his purchase at a discount (while personally obligating himself rather than twitter to cover its cost). He can afford it if he is sure he wants to keep twitter! So refusing to pay bills, and taking firm stands in publicly firing employees, is as much or more a culture play as an economic one – it’s about the future of the company, and the future of the company the way he wants to build it.
Personally I’d hate to be a vendor to a company that has to be sued to pay its bills. Ultimately he’ll probably have to pay for those private jet flights.
GO ELON!!! Of course Twitter will eventually pay the bill, but I agree that this sends an extremely clear message to the twits at Twitter. What possible reason could there be for incurring this absolutely unnecessary expense just before the company was sold? It was an arrogant move by an executive who wanted to ‘get away with it’.
He will end up paying for the flights, and to other vendors, and his public postulating and somewhat confrontational approach may make it more palatable for other vendors to cut them off or refuse to enter into business with Twitter/Musk in the first place. Thus is the culture of the US right now.
My props this month to the San Francisco building inspector/code enforcement inspectors who are citing Twitter for violating zoning by putting in sleeping facilities in offices.
These were literally the exact same kinds of corporate media narratives they pumped over the airwaves when Trump was saying outrageous things that they wanted to drown out, like tik tok should be banned, twitter was censoring and the laptop was real.
Coincidentally, Elon also just released troves of internal twitter communications the regime would prefer people not hear.
“He works insane hours with unbelievable dedication to the causes he commits himself to”
As do a great many of us here, assuming we hold constant the definition of s**tpoasting online as “working”!
I’ve sold businesses before. These kinds of expenses, incurred in the last days or weeks of ownership by employees or owners, should’ve been discussed and agreed for in the closing agreement(s). If Musk, or his legal team, missed it, he’ll have to negotiate with this (and other) vendors, and probably settle. But conceptually this expense has to be paid for by the owners at the time of expense.
Go Elon! Give them hell.
Holly moly that’s the cost of 1 roundtrip?!? Guess i’ll be sticking to commercial 😉
Good luck with that. The business pays its expenses or goes to court/collections. It’s pretty simple
If the vendor knew that there were authorized channels for booking private jet travel and this was outside of that channel, Musk could have a leg to stand on.
At the minimum, the private jet company’s business is undoubtedly shrinking dramatically and they will fight to get whatever revenue they already flew but every vendor to a large company does have processes through which they deal with the entity that they expect to pay the bills.
I am not making any bets one way or the other how it will all turn out but “technicalities” are either leigitimately written and known or they are not.
Since this is before the sale of Twitter (Elon didn’t own it yet), that bill should go to the former owners.
Also, $200k for a RT private jet?! Who in their right mind would think this makes any business sense?! They did this because they could, and just wanted to stick it to Elon. I’d refuse to pay it also. I fly 2-3 weeks a month on average for work…I can only book economy…even when taking a 15 hour flight to Australia.
Simply insane to suggest that Twitter-the-company isn’t on the hook for expenses Twitter-the-company racked up. Sociopathic level stuff. Who’s going to do business with him now?
If he’s pissed off then the target of his ire should be the employees who incurred the (arguably unnecessary) costs. Also, his team that didn’t negotiate to reduce the purchase cost of the company by the disputed amount.
“Medium to large enterprises are bloated” – ha, all woke companies are bloated, this is exactly why they are woke – too many incompetent managers with too much time on hands to invent work. Lean companies do not have time for virtue signaling, DEI, ESG, carbon footprints etc – they’re busy creating value
@NedsKids
Hooray for the City of SF’s overpaid hall monitors.
Selling furniture and getting rid of food and props is all for show. It doesn’t move the needle a single penny as he overpaid by a huge price and wanted to back out. Nobody was buying that company. It will continue to lose money.
@Robertw
Exactly…. I have bought furniture off of corp liquidation auctions, or even regular lot sales, and you can get what I’ll call the mid-level manager office package for $200-300, sometimes as low as $50 at auction. Basically they’ll break even for what it will cost to trash what doesn’t sell.
@Mark “Since this is before the sale of Twitter (Elon didn’t own it yet), that bill should go to the former owners.”
The former owners are shareholders, who got paid through Musk’s acquisition.
The debts are debts of the company, which Musk purchased (inclusive of its debts).
His theory of the acquisition was that the company was poorly run. This $200k private jet flight just shows that he was right!
@NedsKid – “My props this month to the San Francisco building inspector/code enforcement inspectors who are citing Twitter for violating zoning by putting in sleeping facilities in offices.”
I dunno, they say Musk is the first person to create new housing in San Francisco in 20 years.
@ Tim Dunn
“technicalities” are either leigitimately written and known or they are not.’
IME everything in your post is logical and erudite.
However, I had an experience here in Australia when trying to seek repayment of a loan contract wherein the lawyers raised the issue of “substantive” clauses – apparently, there can be legal wiggle room, if you can exploit the difference between a substantive and non substantive clause!
I have no idea whether such nuances of contract law prevail in the relevant US legal jurisdiction.
platy,
good to hear from you.
It is no surprise that the US is the wild west of law.
I am not a lawyer and agree with Gary above that Musk acquired the company and its debts but if there was a failure to follow established purchase procedures which the vendor knew and which they followed even before the acquisition, the chances are pretty good that Musk might prevail.
There are alot of pre-conditions before the comma in my sentence and it is only a matter of how hard Musk wants to press to make his own point.
There is no doubt that he is doing all possible to conserve cash so he has legitimate reasons to drag out payment even if he pays later.
@ Andy (the other one)
“Medium to large enterprises are bloated” – ha, all woke companies are bloated, this is exactly why they are woke – too many incompetent managers with too much time on hands to invent work.”
You are at liberty to call whatever you want “woke” – even a bloated company. But the term itself is meaningless, unless clearly and specifically applied.
And yet, Twitter, Facebook, etc., have created whole new products / services / markets (social media), thereby also creating HUGE corporate value.
“Lean companies do not have time for virtue signaling, DEI, ESG, carbon footprints etc – they’re busy creating value”
And yet, studies of global consumers conclude that 85 percent of people indicate that they have shifted their purchase behavior towards being more sustainable in the past five years (The Global Sustainability Study 2021, conducted by global strategy and pricing consultancy Simon-Kucher & Partners).
Smart businesses regard such as a value creation opportunity.
Those that don’t risk being left behind as their obsolete world view and refusal to accept reality drives an ever greater disconnect between their backward position and the evolving marketplace.
In other words, calling something “woke” because you don’t like it, doesn’t make it go away…..;)
@ Tim Dunn
“There is no doubt that he is doing all possible to conserve cash so he has legitimate reasons to drag out payment even if he pays later.”
Yes, creating an interesting case in interesting times…..;)
NedsKid The homeless in San Fran and overall calif get to sleep wherever they want so why can’t Twitter let their employees sleep in the Twitter offices? They pay enough taxes to be there… Also sleeping at the office if working late is safer than trying to get home in san fran…
The former Ceo needs to be sued by Elon’s lawyers,..
Not actually paying what was agreed to is a time honored corporate tradition. I’ve done it many times – sometime due to nothing other than finding the color of their business card annoying. Sometimes the other party agrees to take less to make an annoyance (me) go away. Sometimes I pay the stated amount months later. Have never paid a dime more. On nickel and dime stuff like collections it just comes down to who wants the nickel more. Not paying and seeing what happens annoys most people but is a pleasant hobby for me. Kinda like points and miles.
Twitter was a stock sale not an asset sale. Thus Musk purchased the stock of the company .. He did not buy the net assets and assume liabilities of the company (he may have made a 338(h) election) but all recorded and unrecorded liabilities are part of the company and transfer to the new shareholder ..
Door number 3… Twitter refuses to pay and passes the expense, without reimbursement, to the former employee for booking travel outside of the approved process.
Well, (A) Musk just doesn’t want to pay the bill, and (B) he wants you think that that’s morally justified, or somehow even a good thing. As Freud would say, that is ‘The Psychopathology of Everyday Life.’
To Tony: Do you work 120 hours a week? Do you oversee many multinational/international companies? Are you responsible for thousands of families? If not then you probably need to keep your snide remarks to yourself.
If there’s no history of the CFO taking $200,000 private flights BEFORE this incident, then I think Twitter could sue the individual. The CFO doing that the day before the new owner took over appears to be a criminal act, to me.
Those previous managers were out to screw everyone. The top 3 — Agrawal, Segal, and Gadde — got a base severance of nearly $122 million. The CFO Ned Segal got $44 million of that. He can afford to pay his own $200k flight. Using company $$ and unauthorized booking tactics is a gross misuse of shareholder money.
I hope Twitter sues him in civil court and gets awarded punitive damages as well.
I think Musk needs to look at what other charges that corrupt criminal “charged” in the last months…
So, throw a vendor under the bus to make a point? Muskers (Musk suckers) are unbelievable!
So why regular people must follow the rule “pay the bill and then go to court?” And Musk is so special?
How is it a vendor’s fault anyway?
They provided service, so pay for it and then sue whomever u wish.
How the hell company allowed such expenses which is equal to early salary of a senior engineer?
I remember I have booked flight outside oficial system while I was working in Twitter (500$ or so) and no one reimbursed me this expense.
@ platy. good points. Of course the question remains of “why”? Perhaps Obama was right, and it pains me to say that since he never built anything either, but “they didn’t build it”.
“Twitter seems to have been fairly bloated. That’s not uncommon in a medium-to-large enterprise, especially in tech.”
I might add . . . or in nearly all levels of government.
Elon Musk absolutely should not be held responsible for the nearly $200,000 flight that an unauthorized Twitter executive charged the day prior to Mr. Musk’s purchase.of Twitter. Since the executive was unauthorized, the correct course of action for the vendor is to go after the unauthorized executive.
Wow, the non-lawyers in here are just wishcasting [redacted -gl]. The CFO can bind the company to any expense, period. Elon is going to eat an extra 80% in lawyer fees to make a point on a company that is in a cash crisis because he overleveraged it by 100%. He’s selling Tesla shares just to make interest payments already. He is an investor who believed his own hype and he’s driving both Twitter and Tesla into bankruptcy. I can’t wait for the shareholder derivative suits against Elon and the Tesla board for allowing him to buy Twitter with basically a margin loan.
Its owed. He may not like it, and yes, it was a finger in the eye to Musk by the guy, but it’s a legitimate expense regardless of the language. The person doing the traveling was likely authorized.
At the same time, this was grifted by the guy. There is no reason he couldn’t fly commercial. The most expensive last minute business class ticket was much cheaper. It’s difficult to understand why ANY company would allow such expense. The only reason to allow private travel is because the location to and/or from are rather remote or rural. I traveled from Grand Island, NE to St George, UT and I had to traverse two hubs. It took me 8 hours to fly it. Much faster than driving, but a direct nonstop private jet would have taken less than 3 hours. For a corporation, if my time is their money, that may be justifiable…may.
Several years ago, I wrote a proposal for a software program that would expose such grift at corporate America in the form of a corporate flight reservation system that would automatically set up Transporation for anyone working for the company. I never followed through because the technology just didn’t exist for it 25 years ago. Maybe now it does. But I digress…I would have fired that dude for doing what he did.
@ One Trippe
Good to hear from you.
“I might add . . . or in nearly all levels of government.”
FWIW here in Oz there has been a decline in Public Service positions of about 14.5% over 10 years driven by the ever present drive for the government of the day to balance its budget.
In some cases actual customers (residents) may experience little difference in service levels – but there are also persistent reports of inadequate or absent function.
In other cases, government has attempted to replace human function with automated – one obvious example being the Robodebt disaster (automated calculation of incomes for those receiving various government payments such as disability or pension allowances resulting in inaccurate penalisation) – now four to be illegal with ongoing government enquiry.
Can’t talk to the US example – I guess you have to look at the details?
Ironically (and relevant to the OT) local Oz politicians are often found to falsely claims travel allowance payments – they get to adjust their math and pay an over claim after the fact rather than being charged with the criminal misdemeanour of stealing from their employer. Go figure!
Be well – wishing you the best over the festive season.
Clearly nobody knew of Musks plans to buy Twitter.
Nobody knew he had plans to shake up the woke culture which meant top decision makers would be axed.
Nobody knows of extravagant
Executive careless purchases.
If I were a vendor in this case I might of taken into consideration Twitter was in the process of being sold and could of taken some precautions.
So few people know that Cali and San Fran has the most expensive real estate in the country, it is shocking a new owner who told the entire world he would make cuts to improve the bottom line would be renegotiating the company office lease.
So few knew of Musks utter disgust of bot accounts and a censorship board, as well as a Woke culture, yet employees are surprised they were let go.
Wake up all of you, you had all been well appraised of musks plans….all of this was reported daily in every media!
More like Trump every day
This is the single most boot licking article I’ve ever read about elon
“He works insane hours with unbelievable dedication to the causes he commits himself to, and he expects the same (or something approximating it) from those that work for him. He doesn’t like meetings, bureaucracy, or waste. He likes doing things and breaking things and pushing aggressively.”
Really? Seriously? Hahaha no. He doesn’t work insane hours, he forces employees to. He doesn’t like meetings and bureaucracy? Because he’s an idiot, that’s how he accidentally bought Twitter in the first place and lost over a quarter of his wealth in the process all while TANKING Tesla. He loves waste, just look at all his fake vehicles and stupid road tunnels. He sure is good at breaking things though
A superbly written article with a great analysis. Thanks!
He’s sending a message to his employees by not paying a vendor? Huh? I love this gymnastics routine 10/10
The message being sent and received is to the users, vendors, and advertisers. The message is that Twitter is swirling the drain and if you provide services and expect to be paid in a timely and agreed upon manner our purchase advertising and expect it to reach a particular audience in a particular method and manner, they’re is a notable and significant risk of failure.
When you buy a company you also buy its debts. NO, Musk is not sending a reasonable message. NO, it’s NOT acceptable to stiff creditors and businesses you have employed. It shows only that you are not a reliable business and you are risky to do business with. Elon, pay your bills.
every company i have worked for i would be liable for any expense i incurred outside of policy. the executive owes the bill.
Cutting half the staff and then demanding the remaining staff work double-time doesn’t indicate much bloating to me
Anyone who knows how these transactions work know that this was not “Elon’s money”. Right before closing, all of these costs are aggregated and taken into account in a working capital adjustment with a holdback that carries through until after closing to adjust for this one thing. It’s hilarious how you folks love defending things but not understand how take-privates work.