Musk’s Twitter has been sued by at least six companies for unpaid bills

Elon Musk’s Twitter account was sued again in California this week for allegedly failing to pay vendors.

The latest complaint comes from a tech startup called Writer, Inc., and is at least the sixth company to sue Twitter in the United States for breach of contract and nonpayment since Musk took over four months ago.

At Tesla and the CEO of SpaceX led the $44 billion purchase of Twitter, which closed around October 27, 2022. He sold billions of dollars in Tesla stock and acquired $13 billion in Twitter debt while serving as sole director, new owner and CEO. there.

Since then, Musk’s social media venture has been sued for non-payment by The Author and at least five others:

• Owner in San Francisco, Columbia REIT
• Private jet transportation service provider, Private Jet Services Group
• Event planning and production company, Blueprint Studios Trends
• M&A consulting firm, Innisfree M&A
• And Analysis Group, a firm that provided litigation-related consulting services to Twitter and its counsel before Musk bought the company.

The legal and public records database, PlainSite, tracks these lawsuits as they occur.

Twitter alleged non-payment of rent for Columbia REIT, has led to the real estate company defaulting on loans for buildings, including where Musk rents office space at 650 California Street in San Francisco, Fortune first reported.

Twitter is also alleged to be behind on payments to large companies. According to a Platformer report on Thursday, Twitter abruptly cut off employees’ access to Slack this week after failing to pay their bills. Slack is the company’s proprietary workplace chat and collaboration platform Salesforce.

In the newest complaint, filed in the California Superior Court in San Francisco, Writer said that Twitter failed to pay the bill for a relatively modest amount of $113,856.

Previously known as Qordoba, Writer describes itself as an AI company that helps employees create content that meets employer standards for branding, copy, and other style guidelines.

The author did not immediately respond to a request for comment on the matter.

Twitter’s Vice President of Product, Trust & Security, Ella Irwin, told CNBC via e-mail, “We do not comment on pending litigation or various speculations about Twitter’s financial health.”

Musk has publicly groused about and made light of Twitter’s financial woes. this week, he wrote on Twitter, “Say what you want about me but I got the biggest non profit in the world for $44B lol.”

Nonpayment disputes like this aren’t uncommon after leveraged buyouts, according to Boston College finance professor Edith Hotchkiss. He said in an email to CNBC that they are “more typical of companies that are in a very short window to file for bankruptcy.”

Vanderbilt University finance professor Josh T. White, a former SEC economist, agreed that the move was unusual, and said that litigation over nonpayment to vendors could lead to “an improper and aggressive capital structure.”

Musk’s Twitter deal was financed with 30% debt and 70% equity at closing.

White explained that high debt levels are aggressive for companies with unstable and sometimes negative free cash flow, such as Twitter has experienced for the past three years.

Leveraged buyouts more often target companies with stable cash flow that can be used to pay off debt and generate tax shields by reducing interest costs, he wrote.

“Using more debt and less equity reduces the amount of liquid cash Musk and equity investors have to contribute at closing, which could result in a higher internal rate of return if the company is profitable,” White said.

Meanwhile, even after aggressive cost-cutting measures, including Widespread layoffs and cutbacks in benefits and infrastructure, Twitter is still probably struggling to generate positive free cash flow to pay its obligations, White suggested. “Nonpayment, and breach of contract is definitely a red flag that the company is likely to be financially depressed.”