Elon Musk Warns of Possible Bankruptcy of Twitter

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• In his first speech to company staff, the billionaire investor said tough times are ahead as he announced more work and fewer benefits.
• The company recently contracted a huge bank debt, the interests of which Musk still does not know how he will be able to cover.
• The tycoon’s comments about the company have raised the level of uncertainty and mistrust to the maximum.

Twitter owner Elon Musk warned employees during his first speech that the possibility of bankruptcy cannot be ruled out if the company fails to generate more cash, reports Bloomberg.

Musk’s warning comes amid several resignations from top executives at the company. It is also just two weeks after he took the reins of the social media platform, during which he has been making news constantly.

During that period, the controversial tycoon fired most of the top executives and half of the company’s staff by email. The remaining employees have been ordered to return to the office. This is despite the fact that many had stated that they did not want to do so.

One of the executives who resigned was Yoel Roth, the company’s chief security and integrity officer. Another departure was chief cybersecurity officer Lea Kissner. Also quitting was the vice president of sales, Robin Wheeler, whom Musk had convinced to stay, according to individuals who spoke on condition of anonymity.

Musk’s comments about the company in recent days have raised the level of uncertainty and distrust to the maximum. Bloomberg said some funds have offered to buy the loans for as little as 60 cents on the dollar. This is a rock-bottom price only offered when companies are in deep financial trouble.

The cold-water bath for staff offered by Musk was followed by the announcement of 80-hour workweeks. There will also be no free food in the office, or the option of remote work established during the pandemic.

"If you don’t want to come, resignation accepted," was Musk's blunt warning. And when asked about the possibility that employees decide to desert, the billionaire replied that everyone should be tougher. According to Musk, Twitter needs to obtain an alternative source of income to advertising as soon as possible. This is because several large companies including Volkswagen (ETR:VOWG_p), General Motors (NYSE:GM) and Audi have stopped advertising. Ads from the pharmaceutical company Pfizer (NYSE:PFE) and the food manufacturer General Mills (NYSE:GIS) have also ceased. These giants claim to be studying the company’s situation.

The $8 subscription proposal for Twitter Blue launched by Musk did not go down well with users of certified accounts. They have so far enjoyed the service for free, including politicians, governments, celebrities, athletes and journalists.

Advertisers are concerned about harmful content being broadcast online and political bias from Musk, who asked American voters to vote for Republican candidates in the midterm elections.

On the Flipside

• The top executives of the company fear that Twitter will be fined by the Federal Trade Commission (FTC) due to the use of user data.
• After the purchase of Twitter for 44 billion dollars, the company contracted a debt of $13 billion. Its interest is calculated at $1.2 billion annually.
• The company is no longer public, so it is not currently subject to market scrutiny.

Why You Should Care

Musk’s threat of bankruptcy aims to motivate workers to improve their performance, as it has done in the past. However, the company’s tumultuous work environment and the “dumb decisions” being made could sabotage that objective.

“Twitter’s governance risk is highly negative reflecting Moody’s expectation for aggressive financial policies and concentrated ownership by Elon Musk,” Moody’s Investors Service, a rating agency, said of the company.

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