We don't have exact insights to X.com's books, but we have credible reports from the Financial Times that they produced over a billion dollars in ebitda in 2024. This is completely possible with a 50% revenue drop. They laid off 80% of the company, something like 6,000 people.
I’m not sure about profit, but I do know that Twitter made $1.4B in profit in 2019 according to their SEC filings.
If the GAAP income is negative, the company lost money last year. End of story.
Beautiful turnaround if those figures are reliable, but like Munger calls them, EBITDA tends to bullshit metrics derived by cobbling up bullshit to hide that a company is losing cash.
Just like Figma booking $700M in 2023 profits which was only possible because of the $1b Adobe breakup fee. Proceeded to lose $732m on $749m in revenues the very next year.
Keep in mind that a LBO is actually a good deal for the bank, because if the purchased company goes bankrupt, the bank can recoup their investment by liquidating the company.
However, that only works if there are assets to liquidate. This can include physical assets, valuable IPs, or favorable lease agreements. In other words, anything that someone else would want to purchase.
Twitter, being a website, doesn't have a whole lot of assets they could sell. Which meant that other collateral was required for Musk to secure financing.
Ownership of the company itself can be sold, but this only works if there's someone who believes the company was overvalued. Unfortunately for Musk, Twitter's market cap dropped by tens of billions between the time he locked-in his offer and the deal's effective date. It's hard to find banks to fund your LBO when you're paying significantly more than what the market believes the company is worth.
Twitter is yet an unfolding story but it seems to be working.