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.
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.
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.