Elon Musk’s Twitter Takeover Seen Swelling the Company’s Debt

Author: Editors Desk Source: WSJ:

October 24, 2022 at 09:37

Twitter will add about $13 billion of debt if Elon Musk completes his acquisition of the social-media platform. PHOTO: JED JACOBSOHN/ASSOCIATED PRESS

Social-media platform’s annual interest burden will climb to more than $1 billion from $51 million last year, analysts estimate

Twitter Inc. TWTR 2.34%▲ has struggled for most of its history to make a profit. If Elon Musk completes his $44 billion acquisition of the social-media platform, one factor will make that harder: the money he borrowed to fund the transaction.

As part of the deal, Twitter will add about $13 billion of debt. Analysts estimate, based on terms previously laid out in documents related to the transaction, that Twitter would be on the hook for annual interest payments of more than $1 billion, compared with some $51 million in 2021. Twitter has posted average annual earnings before interest, taxes, depreciation and amortization of about $700 million over the past five years.

That interest burden means Twitter will need to find ways to make revenue grow and expand profit margins, said Jordan Chalfin, a senior analyst at credit-research firm CreditSights. “They’ll probably burn a significant amount of cash,” he said.

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