Confidence in Twitter has hit what might be an all-time low just two weeks into Elon Musk’s tenure as owner. Yesterday on a call, Musk told Twitter staff that bankruptcy is a real possibility, as next year Twitter could face billions more in losses.
The Verge posted a full transcript of Musk’s staff meeting, where different employees attempted to find out what their priorities should be to help Musk keep Twitter afloat as the economy remains unstable. Musk kept his responses brief and said top priorities included growing Twitter’s user base by 1 billion (while critically monetizing more users), compensating creators on the platform, and improving Twitter search. In short, he asked his remaining team members to go “hardcore” to make Twitter “more compelling,” so he can sell that product to users, or else resign. One of his biggest and out-there ideas, which he says is “definitely happening,” is tweaking Twitter to become a digital payments 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 brutal honesty about a potential Twitter bankruptcy has increased doubts that the platform will survive Musk’s leadership style. In addition to dipping Twitter into debt by $13 billion when he bought it, then losing $4 million a day in ad revenue, Musk now has to deal with interest payments that Reuters reported will total “close to $1.2 billion in the next 12 months.”
Those interest payments, Reuters said, would amount to 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 pressured to perform well and asking Musk how he plans to address the cash flow problem.
“We just definitely need to bring in more cash than we spend,” Musk replied. “If we don’t do that and there’s a massive negative cash flow, then bankruptcy is not out of the question.”
The world’s richest man facing bankruptcy sounds almost as absurd as some of the best parody accounts trolling users on Twitter today, and some wonder if Musk is throwing the term around as a way to stir up staff that feels connected to the platform they built. Bloomberg noted that Musk has used “the threat of financial ruin” in the past to motivate his employees. “He’s trying to convey the notion that if people don’t work hard, Twitter will be left in a very difficult spot,” a person familiar with Musk’s management style told Bloomberg.
Of course, the threat of bankruptcy affects more than just staff. Bloomberg said that debt investors and credit raters were just as concerned by Musk’s statements, sending inquiries to hedge funds and asset managers to see if anyone wants to buy out some of Twitter’s debt at much lower rates. Banks that helped finance Twitter through $6.5 billion in leveraged loans could face billions in losses, Bloomberg’s calculations show.
As banks weigh available options amid Twitter’s bleak finances, Musk continues pouring money into Twitter, selling $4 billion in Tesla stock to “save” Twitter, The New York Times reported.