Usually when companies file for bankruptcy, it’s because they’re swamped by debt and realize that they’re about to be sued into oblivion. Filing bankruptcy gives them an way to discharge or restructure their debt in the hopes they can keep operating, or at least wind things down in an orderly fashion.
But here’s a fun fact from US bankruptcy law:
- Companies can be forced into involuntary bankruptcy by their creditors.
- If there are more than 12 unsecured creditors, all it takes is three to file a petition.
- There must be a significant amount of money at stake, but it’s a pretty low threshold ($16,750 as of 2022).
Guess who meets those criteria? Twitter.
Since he took the helm, Musk has made a habit – maybe even followed a plan – of refusing to pay Twitter’s bills. He’s refused to pay the company’s tab on Google cloud, stiffed several landlords, and given the financial finger to a variety of airplane rental companies, public relations firms, consultancies, and other services firms.
At the moment, 26 companies have sued Twitter over unpaid debts.
Lenders sometimes have conflicting motivations. On the one hand, they’re wary of antagonizing someone like Musk who heads numerous large enterprises and will likely carry a grudge. Forcing Twitter into bankruptcy probably ends any future hopes of getting business from Tesla, Space-X, Boring, etc.
But there are three companies that don’t fit this criteria, for various reasons.
Google: Twitter has said it wants to move off cloud hosting and move these services in-house. It signed a multi-year deal so it’s on the hook to pay some money to Google whether it moves off or not. Typically these deals are structures so the client has a minimum-spend and they anything over that is billed at a favorable rate. Even if Twitter shuts down every Google service it’s using, it’s on the hook to pay some part of that bill over the next several years. Google might well decide that since Twitter is moving out, they have nothing to lose. Also, Google is big enough that Twitter’s usage is a tiny fraction of its overall revenue and Musk probably isn’t extensively using their services elsewhere (nor is likely to). Finally, Google might see this as an excellent opportunity to send a message to its other corporate clients that it will enforce its contracts.
Private Jet Services: Twitter owes this company nearly $200,000 for flights booked by an a single executive in October 2022. This was before Musk took over, but since the debt was incurred on Twitter’s behalf, that’s irrelevant. PJS has no expectation of future revenue with Twitter. And Musk, of course, owns his own jet. As part of cost-cutting, no one else at Twitter is flying around on private jets. PJS has nothing to lose.
Analysis Group: This boutique consulting firm helped Musk with his fight in the Delaware Chancery Court last year. As you may recall, Musk signed a deal to buy Twitter, then tried every possible way to squirm out of the deal after tech crashed and it was obvious he’d grossly overpaid. Analysis Group is owed $2.2 million. What’s the odds that Musk is going to need that service again?
There are also a host of small landlords who don’t expect that Twitter is going to need another office in their town, as well as other law firms and consultancies owed money.
Related Posts:
I also enjoy using LEBs! I have an empire of little guys for VPNs, larger guys for apps, and big guys for databases and storage. When I'm not in front a screen I'm into German Shepherd dogs, quality knives, target shooting, theology, tabletop roleplaying games, and forest hiking.
I enjoy writing technical articles here on LowEndBox to help people get more out of their systems. You can find me on LowEndTalk @raindog308
- COMMUNITY NEWS: RackNerd LLC, Global IaaS Provider, Expands European Footprint with New Dublin, Ireland Datacenter - November 16, 2024
- Hey Providers – Want Some FREE Advertising During the SuperBowl? - November 14, 2024
- Inception Hosting is Closing Its Doors - November 12, 2024
I just heard he’s rate limiting unverified users to VIEWING 600 posts per day.
You could burn that up pretty quickly, and it’s hard to imagine running an advertisement based revenue model when you limit viewership.
I’m guessing he’s either trying to put the company into bankruptcy, or failing to pay those bills has caught up with him, which is likely to have the same result.