Trust in Twitter hit what could be an all-time low just two weeks into Elon Musk’s tenure as owner. On a call yesterday, Musk told Twitter staff that bankruptcy was a real possibility because next year Twitter could face billions more in losses.
The Verge published a full transcript of Musk’s staff meeting, where different employees tried to figure out what their priorities should be to help Musk keep Twitter afloat as the economy remains unsettled. Musk kept his answers brief and said top priorities included growing Twitter’s user base by one billion (while critically monetizing more users), paying creators on the platform. form and improving search on Twitter. In short, he asked the remaining members of his team to go “hardcore” to make Twitter “more compelling,” so he could sell this product to users, or else quit. One of his biggest and most popular ideas, which he says is “definitely happening,” is to tweak Twitter into a digital payment platform.
“If you have a compelling product, people will buy it,” Musk told staff. “That has been my experience at SpaceX and Tesla.”
Musk’s blunt honesty about Twitter’s potential bankruptcy has heightened doubts that the platform will survive Musk’s leadership style. In addition to putting Twitter $13 billion in debt when he bought it and then losing $4 million a day in ad revenue, Musk now faces interest payments that Reuters says will total “nearly $1.2 billion over the next 12 months”.
Those interest payments, Reuters said, would be more than Twitter’s most recently disclosed cash flow of $1.1 billion in June. And Musk’s team seems to be well aware of this risk, feeling compelled to perform well and asking Musk how he plans to solve the cash flow problem.
“We definitely need to bring in more money than we spend,” Musk replied. “If we don’t and there’s massive negative cash flow, then bankruptcy isn’t out of the question.”
World’s Richest Man Facing Bankruptcy sounds almost as absurd as some of the top parody accounts trolling users on Twitter today, and some wonder if Musk is using the term as a way to incentivize staff who feels connected to the platform he has built. Bloomberg noted that Musk had used “the threat of financial ruin” in the past to motivate his employees. “He’s trying to convey the idea that if people don’t work hard, Twitter is going to be in a very tough spot,” a person familiar with Musk’s management style told Bloomberg.
Of course, the threat of bankruptcy does not only affect the staff. Bloomberg said debt investors and credit assessors were equally concerned about Musk’s statements, sending inquiries to hedge funds and asset managers to see if anyone wanted to buy back some of the debt. from Twitter at much lower rates. The banks that helped fund Twitter with $6.5 billion in leveraged loans could face billions in losses, according to calculations by Bloomberg.
As banks weigh the options available amid Twitter’s bleak finances, Musk continues to pump money into Twitter, selling $4 billion worth of Tesla stock to “save” Twitter, The New York Times reported.
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