Thread by @ChrisBloomstran

Twitter departed the world of public companies just shy of its 9th birthday. To the question of who won and who lost, the answer should be obvious. From a start of $45 on 11/7/13 to Elon's buy this week at $54.20, the shareholder made 20.4%. That's cumulative. 2.1% per year. 1/

Over the same stretch, the S&P 500 earned 157.4%, 11.1% per year. While revenues at Twitter grew from $665 million at year-end 2013 (post-IPO) to an annual run rate of $5.2 billion at 6/30, an impressive 26% per year, expenses exceeded revenues in 7 out of 9 years. Losses. 2/

Cumulatively Twitter lost $771m but did produce positive $6.5B in cumulative cash from operations. Impressive, until considering a mind-boggling $5.2B in "non-cash" share-based comp as most of that, the always pesky SBC that CEOs/CFOs insist investors ignore. Adjusted EBITDA. 3/

After the 2013 IPO, Twitter had 570 million shares outstanding which ballooned to 771 million at 6/30. The acquisition immediately vested additional insider option and RSU shares, which brought the total share count acquired by Elon and a few close pals to 812 million shares. 4/

For those keeping track at home, that's an increase in the share count of 42%, dilution to the original non-insider shareholders of 30%, or a painfully expensive 2.9% per year. Management even decided it was a good idea to launch repurchases in 4Q 2020, despite a profit void. 5/

Spending $245 million that quarter, another $931 million in '01 and a whopping $2.2 billion in Q1 2022 alone (sales were $1.2B), repos totaled $3.3 billion over 18 months that saw Twitter produce no profit. What did the company have to show for the repos? Huge share reduction? 6/

Nope. The share count shrank from 780 million shares to all of 771 million outstanding, a miniscule 1.1% reduction. For that, Twitter spent 7.4% of its final $44 billion market cap at acquisition. It would be hard to believe except the financial statements generally don't lie. 7/

It seems the Twitter brass perfected not the production of cash for the owners but the production of shares for themselves. Excluding insider ownership at the time of the IPO, the 242m increase in shares outstanding were not created via secondary offerings. SBC gone wild. 8/

Those 242m shares, again, 30% of the company over 9 years, were those given to insiders for which they paid the company $1.7 billion upon exercise but which were worth $13.1 billion. Not a bad gig if you can get it. At least the shareholder made something, if only 2.1% a year. 9/

My bet would be the new birdkeeper, the one who shelled out nearly $26 billion of his own money (including 9.6% already owned), joined by friends like Larry Ellison and Qatr with another $5.2B cash and $13 billion in new debt from the banksters, is already planning the IPO. 10/

But what did he get? We'll soon see the wisdom of paying $44B for a business doing $5.2B in sales (that's 8.5 times) and losing money. Twitter came out of the IPO with $2.2B in cash and $200m in debt or $2B in net debt. At June 30, $6.7B in debt exceeded cash by $600 million. 11/

Recall the share repurchases. If you are losing money, you need cash from somewhere to buy the stock back. Why not leverage? Yes, why not? Now, post acquisition, in private equity fashion, Elon layered $13 billion in new debt on the net $700 million already in existence. 12/

Said differently, Elon's new money-burning company now has nearly $20B in debt and $6 billion in cash on $5 billion in revenues which were already being slowed by the recession in ad spending. "Interest burden" will become part of the lexicon in the hallowed halls of Twitter. 13/

The debt financing the deal is not like PE debt, where the PE crowd often brings its own high-yield debt to the party. This debt is hypothecated by Twitter, not guaranteed by Elon, and the bankers will surely demand not only their interest but their money back at a point. 14/

Read this as a short leash. From a start, the new Twitter begins private life with net debt at 2.7 times REVENUES, not 2.7 times EBITDA, which to some, at the multiple to EBITDA, is on the high side. EBITDA at the moment happens to be $331 million for the past 12 months. 15/

EBITDA at Twitter hit a high mark at nearly $1.1 billion in 2021, making net debt a not-low 12.5x, which even private equity folks might find a tad high. To bring the company back public, at the moment there seems little room for further debt, or the cash flow to shrink it. 16/

This is now Elon's burden. Perhaps the car company, er, software company, will be so cash-generative to buy Twitter. Probably not. In the meantime, kudos to the former Twitter brass. Happy swimming in your money mountain! To the former Twitter shareholders: Better luck next time.

*$2B in net CASH. Need an edit button, Elon.

This is now Elon's burden. Perhaps the car company, er, software company, will buy Twitter. Probably not. To the Twitter brass, departing and departed: Enjoy swimming in your mountain of hard-earned money. To the non-insider and former Twitter shareholder: Better luck next time.