Twitter boss Elon Musk told employees at a recent all-hands meeting that the company is losing so much money that “bankruptcy is not out of the question,” according to The Information.
Posted BY: Zero Hedge
Twitter, which hasn’t turned a profit since 2019, has seen a “massive drop” in revenue according to Musk, as advertisers step back from spending campaigns.
Musk also suggested during the meeting that the company’s future depends on the success of the revamped $8 per month Twitter Blue subscription service – which is currently being bombarded by bots, scammers, and impersonators.
Okay twitter blue has been such a success I need to do a thread. Feel free to add to the 🧵on the great launch of this product pic.twitter.com/cx1bEFp9Yn— Read Jackson Rising by @CooperationJXN (@JoshuaPHilll) November 10, 2022
“The reason we’re going hardcore on subscribers is to keep Twitter alive,” Musk said, according to The Information, adding “Without significant subscription revenue, there is a good chance Twitter will not survive the upcoming economic downturn.“
Musk also announced that the company’s “work from anywhere” policy is now canceled, telling Platformer “If you can physically make it to an office and you don’t show up, resignation accepted.”
Banks balking at holding debt?
As Bloomberg notes, Wall Street banks that lent Musk $13 billion to fund Musk’s buyout have been quietly approaching hedge funds to see if they would be interested in chunks of buyout debt at deeply discounted prices as low as 60 cents on the dollar – which would mark one of the deepest discounts in a decade.
The lukewarm investor reception shows just how big of an albatross the Twitter debt is becoming for a Morgan Stanley-led cohort that committed to finance Musk’s acquisition of the social-media firm back in April, before credit markets cratered. The seven banks are now saddled with risky loans that they never intended to keep on their books, and face an increasingly uphill battle to minimize losses. -Bloomberg
In particular, the banks want to unload their $6.5 billion leveraged loan portion of the financing, and if the loans are trading at 60 cents, that implies everything below the secured tranche in the cap structure is impaired (more or less a donut), and the EV on the company is around $8 billion.
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Just to be clear, Twitter senior secured bank loans- the top of the capital stack- at $0.60 implies that Twitter- for which @elonmusk paid $44 billion- is now worth less than $8 billion.— Will Slaughter (@BamaBonds) November 10, 2022
Meanwhile, the Federal Trade Commission has sounded the alarm over an exodus of top employees from the social media giant – the latest of whom was the company’s head of moderation and safety, Yoel Roth, who – as a longstanding left-leaning executive, provided some level cover for Musk.
The government watchdog agency said that it was “tracking the developments at Twitter with deep concern,” and that it’s considering taking action to ensure that the company is complying with a ‘consent order’ which requires the company to comply with certain privacy and security requirements related to allegations of past data misuse.
Twitter was first put under a consent order in 2011, and it agreed to a new order earlier this year. If the FTC finds Twitter is not complying with that order, it could fine the company hundreds of millions of dollars, potentially damaging the company’s already precarious financial state. -WaPo
“No CEO or company is above the law, and companies must follow our consent decrees,” said FTC director of public affairs, Douglas Farrar. “Our revised consent order gives us new tools to ensure compliance, and we are prepared to use them.”
According to the report, FTC staffers said they were most concerned about the rapid rollout of new features which have yet to undergo full security reviews governed by the FTC consent decree. The agency also objected to Musk requiring staff to work in the office at least 40 hours per week, effective Thursday.
Former FTC officials warned that the departures of key privacy and security officials, as well as some of Musk’s proposed changes to Twitter products, opened the company to serious regulatory peril. -WaPo
Employees were not happy in the company’s slack channel following the all-hands meeting.
“What’s the motivation? Work hard or get fired?” asked one employee.
“How do you plan to restore totally destroyed trust?” asked another.
“I am ethically not okay with making the richest person in the world even richer. Also not okay with this alpha dog mentality – it’s already trickling down.”