nuff said
this post was submitted on 15 Jul 2023
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I still don't get how it's legal for Twitter to take out a loan on itself on Musk's behalf.
It's a common trick the wealthy have. The idea is, if the business was under the control of its new owners, they could direct the business to get the loan. It's what happened to Toys R Us and many other businesses.
Somewhat similarly, the UK have a way of turning a business into an "Employee Owned business". Basically, if the business has enough cash, it can buy itself from its owners. The real shady part, though, is that the owners don't pay any capital gains tax on the sale whatsoever. They get all their money out of the business, tax free. But yay, employee owned businesses (that are still run the same as before).
And if you try to read the financial regulations to understand it all, you'll very quickly lose the will to live. Reading law is one thing, financial regulations are a completely different ball game.
That's the part which is the most absurd. Extending a hypothetical to justify a 13 billion dollar loan is bonkers.
I wonder if there's a study of how many companies this has happened to, and how many have come away from it not bankrupt after 5 years. I assume the only reason this is still legal is because the original shareholders get their payday when the company is sold, the new CEO gives themselves a great salary, bleeding the company dry and it's just the employees who suffer when their jobs are cut, which is valued less than the shareholders and CEOs in America.
Don't forget all the customers who lose out on their favourite toy store, and the reduced competition in the market allowing prices to rise even higher.
This practice destroyed several century old retail chains in my country. Got sold to some American investment fund,, via a loan placed on those company's account. Then immediately sold the real estate in prime locations these chains held, so the companies became tenants in buildings they previously owned (and had paid off 80 years ago). Waif a few years, then they die even with decent revenue.
That may be another key benefit, purchase of real estate.
It's not really that different from buying a house or car. The money Musk put forward is the down payment, the loan is the mortgage, the company assets are the collateral. Where it's sketchy is that a house or vehicle is generally worth repossessing and selling if you default, but by the time Musk is done with Twitter, it'll be worthless.
Think of him like a crackhead who strips the plumbing and wiring from the house he has a mortgage on, before skipping town