Elon Musk bought Twitter using a leveraged buyout: He paid with borrowed money. : The Indicator from Planet Money Elon Musk bought Twitter for $44 billion, but almost a third of it was in loans—and Twitter's on the hook to pay them back. This strategy, popular in the '80s, is called a leveraged buyout.

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How Elon bought Twitter with other people's money

How Elon bought Twitter with other people's money

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Samuel Corum/AFP via Getty Images
This illustration photo taken on August 5, 2022 shows a cellphone displaying a photo of Elon Musk placed on a computer monitor filled with Twitter logos in Washington, DC. - Elon Musk has accused Twitter of fraud, alleging the social media platform misled him about key aspects of its business before he agreed to a $44 billion buyout, as their court battle heats up.
Samuel Corum/AFP via Getty Images

Yes, Elon Musk is the richest person in the world. But he only used some of his cash to buy Twitter for $44 billion. For the rest of it, he used a tactic called a leveraged buyout and spent $13 billion of borrowed money on the acquisition. And now Twitter—not Elon—is on the hook for that loan.

Leveraged buyouts had a heyday in the 1980s, when corporate raiders would use debt to finance purchases of companies with healthy balance sheets. The Twitter acquisition, though, is a whole different beast—and as its employees leave en masse and its ad revenues continue to fall, the banks who put up billions to finance the deal might be second guessing their decision.

Carl Tack, who we spoke to for this story, wrote a Substack post on the Twitter buyout aimed at students and young professionals. Listeners may find it informative. It's linked here.

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For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org.