JOKE'S ON HIM

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

Elon Musk's 420 gag ended up costing real money, with real consequences

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Did it for the lulz.
Did it for the lulz.
Photo: Britta Pedersen/AFP (Getty Images)

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.).

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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.

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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.

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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.

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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.