In the midst of Twitter’s mass layoffs, don’t forget it started with a $150 million weed joke

news7f11/05/2022

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In the midst of Twitter's mass layoffs, don't forget it started with a $150 million weed joke

Twitter begins born thousands of its employees on Friday, November 4 — possibly half of its 7,500 employees — just a week after being acquired by billionaire Elon Musk.

The layoffs are an urgent cost-cutting measure for Musk, by some estimates the world’s richest man, after making a leveraged buyout of the social media company. with a bank loan of 12.5 billion USD. Paying off that debt, Musk will lose about 1 billion dollars annuallyaccording to Bloomberg.

The layoff is a by-product of a skewed agreement. Musk first proposed, and eventually acquired Twitter for $54.20 per share. At that time, the price was considered high (38% above stock price when Musk started buying the stock) but not excessively. The only truly outrageous aspect of the price tag is that Musk chose to do a weed joke with the bid (420 is cannabis slang.).

On this day of mass layoffs at Twitter, calculate how much that joke costs.

Musk’s weed prank costs at least $150 million

Assuming that, if he didn’t care about making a stupid joke about weed, Musk would set a flat price of $54 per share to buy back Twitter. (Pricing in M&A often seems arbitrary, so perhaps $53, or even $50, would have been enough to succeed without the stupid joke, but we’re being generous.) That fixed the cost of the stupid weed joke at $0.20 per share, to get the $54 to $54.20 Musk ultimately paid, stupid weed joke and all.

Twitter has just over 765 million shares outstanding. Multiplying the total number of shares by $0.20 per share gives us $153 million. That’s the bare minimum Musk spends on a stupid joke of weeds.

But Musk’s debt payments aren’t a laughing matter. He owes $1 billion in interest a year and just laid off half the company to try to cut costs. If he hadn’t rounded up to $54.20, he’d likely have saved hundreds of people’s jobs.

How much work could Musk have saved?

It’s hard to analyze the average salary of a Twitter employee. But since we used the following napkin estimates, let’s not be discouraged.

We have salary data for H-1B visa applicants, which would reasonably represent a sample of Twitter’s total employees. Pick average wage for each position listed, according to the aggregator’s H1B Grader, and averaging those positions, we get an average salary of around $185,000. Dividing $153 million by the estimated average salary on Twitter gives us 827 jobs.

That’s right, the $0.20 rounding error that once made people laugh at his offer could have cost 827 people their jobs at Twitter.