Amid Twitter’s mass layoffs, don’t forget it began with a $150 million weed joke

Scott Nover
Fri, November 4, 2022

Did it for the lulz.

Twitter began laying off thousands of its employees on Friday, Nov. 4—possibly half of the 7,500-person staff—just one week after being bought by billionaire Elon Musk.

The layoffs are an emergency cost-cutting measure for Musk, by some estimates the world’s richest man, after executing a leveraged buyout of the social media company with $12.5 billion in bank loans. Paying off that debt will cost Musk about $1 billion annually, according to Bloomberg.

The layoffs are the byproduct of a lopsided deal. Musk first proposed, and eventually did end up, buying Twitter for $54.20 per share. At the time, the price was seen as high (38% above the stock price when Musk started buying up shares) but not outrageous. The only truly outrageous aspect of the price was that Musk chose to make a weed joke with the bid (420 is slang for marijuana.).

On this day of mass layoffs at Twitter, let’s calculate just how much that joke cost.

Musk weed joke cost at least $150 million

Let’s assume that, if had been otherwise uninterested in making a dumb weed joke, Musk would have bid a flat $54 per share to acquire Twitter. (Valuations in M&A often seem arbitrary, so perhaps $53, or even $50, would have been enough to succeed without the dumb weed joke, but we’re being generous). That pegs the cost of the dumb weed joke at $0.20 per share, to get from $54 to the $54.20 that Musk ultimately paid, dumb weed joke and all.

Twitter had just over 765 million outstanding shares. Multiplying the total share count by $.20 per share gives us $153 million. That’s the minimum number Musk spent on the dumb weed joke.

But Musk’s debt payments are not a laughing matter. He owes $1 billion in interest each year and just laid off half of the company to try to cut costs. If he didn’t round up to $54.20, it’s likely he could have saved hundreds of people’s jobs.

How many jobs could Musk have saved?

It’s difficult to divine the average salary of a Twitter employee. But since we’re already using back-of-the-napkin estimates, let’s not be deterred.

We do have data about salaries for H-1B visa applicants, which might reasonably represent a sample of Twitter’s total staff. Taking the average salaries for each listed position, according to the aggregator H1B Grader, and averaging those, we get a mean salary of about $185,000. Dividing the $153 million by the estimated average Twitter salary gives us 827 jobs.

Yes, what was once a $0.20 rounding error to make people laugh at his offer could have cost 827 people their jobs at Twitter.

Musk orders Twitter to cut infrastructure costs by $1 billion -sources



Thu, November 3, 2022 

By Sheila Dang, Paresh Dave and Katie Paul

(Reuters) -Elon Musk has directed Twitter Inc's teams to find up to $1 billion in annual infrastructure cost savings, according to two sources familiar with the matter and an internal Slack message reviewed by Reuters, raising concerns that Twitter could go down during high-traffic events like the U.S. midterm elections.

The company is aiming to find between $1.5 million and $3 million a day in savings from servers and cloud services, said the Slack message, which referred to the project as "Deep Cuts Plan."

Twitter is currently losing about $3 million a day "with all spending and revenue considered," according to an internal document reviewed by Reuters.

Twitter did not immediately respond to a request for comment.

The steep infrastructure cuts could put the Twitter website and app at risk of going down during critical events when users are rushing to Twitter to consume and share information, such as during moments of crisis or major political events, the sources said.

The social media platform is exploring whether to cut extra server space that is kept to ensure Twitter can handle high traffic, one source said.

"(Musk) is willing to introduce that risk to meet these goals," the person said.

The second source described the proposed cuts as "delusional," adding that when user traffic kicks up, the service can fail "in spectacular ways."

Teams across Twitter are racing to present a plan to achieve the cost savings by a Nov. 7 deadline, according to one of the sources and the Slack message. Some employees have been ordered to work in the office every day of the week to meet the deadline, the source said.

Cost cuts could also come from reduced spending on Google Cloud services, the source said.

A spokesperson for Google Cloud to declined to comment.

(Reporting by Sheila Dang in Dallas, Paresh Dave in Oakland, Calif.,and Katie Paul in Palo Alto, Calif.; Editing by Kenneth Li, Matthew Lewis and Richard Pullin)