Elon Musk is facing a pile of lawsuits over non-payment to vendors at Twitter.
In the newest complaint, filed in California Superior Court in San Francisco, Writer says that Twitter failed to pay a bill for the relatively humble amount of $113,856.
Previously known as Qordoba, Writer describes itself as an AI company that helps employees create content that meets their employer's standards for brand, copy, and other style guidelines.Twitter's Vice President of Product, Trust & Safety, Ella Irwin, told CNBC via e-mail, "We do not comment on pending litigation or various speculation surrounding Twitter's financial health.
Vanderbilt University finance professor Josh T. White, a former SEC economist, agreed the moves are unusual, and said litigation over nonpayment to vendors could result from "incorrect and aggressive capital structure."White explained that the high debt level is aggressive for a company with volatile and sometimes even negative free cash flow, such as Twitter had experienced in the past three years.
Leveraged buyouts more often target companies with stable cash flows that can be used to service debt and generate a tax shield by deducting interest expense, he wrote. "Using more debt and less equity reduces the amount of liquid cash Musk and his equity co-investors had to contribute at closing, which can potentially generate a higher internal rate of return if the company turns out to be profitable," White said.
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