Following several changes at the firm, such as widespread layoffs and essential employees resigning, Elon Musk stated that Twitter might go bankrupt.
Before Musk took over the firm, Twitter’s advertising income was eclipsed by social media rivals like Facebook and TikTok. In contrast to other businesses, the corporation makes modest and sporadic earnings. However, few people, if any, or even Twitter executives, ever talk about the firm going bankrupt. Musk, however, speculates on Twitter’s potential decline now that he owns it.
For $44 billion, Musk bought the business. But after purchasing Twitter, the new CEO had to deal with some issues, such as settling a $13 million debt. Given that the debt is seven times the business’s income in 2022, Musk is facing a massive burden.
Twitter filing for bankruptcy
According to Andy Wu from the Harvard Business School, MMusk may be compelled to file for bankruptcy for several reasons. Musk must first handle the debt and yearly obligations of Twitter. Bankruptcy will be a better option for Musk and other investors if they believe Twitter won’t make any money.
“It’s hypothetically possible that he could use more of his Tesla stock to bail out Twitter or turn to his cadre of co-investors, who would probably have no trouble finding the money. So the saying, ‘if you owe the bank $100, that’s your problem, but if you owe the bank $100 million, that’s the bank’s problem’ might apply here,” Wu explained.
“Bankruptcy would also allow Musk to refinance the debt, making the company more financially stable. But, in addition to potential financial returns, I sense that Musk and his co-investors are ideologically driven, that values really drive them,” he added.
Wedbush Securities, an investment company, claims that Musk overpaid for Twitter. The company says Twitter only costs $25 billion. Wedbush Securities noted that Musk will be able to renegotiate the company’s debt in a more favorable state by filing for bankruptcy, which is why they labeled Musk’s acquisition of Twitter “one of the most overpaid tech acquisitions in history.”
Many questioned Twitter’s corporate viability in the long run. Musk claims that the business loses about $3 million per day. He thus decided to fire almost 11,000 employees. Additionally, investors’ bleak view of internet advertising drove other businesses to reduce expenses. For instance, Snap let go of 20% of its workforce, whereas Meta laid off 11,000 employees.
Through Twitter Blue, Musk recognized an additional revenue stream. Customers may use the service for $8 per month to get a Blue Checkmark. Celebrities and other users, however, criticized it. Some even copied Musk’s profile to show their concern about almost anyone being able to obtain the blue mark for a fee.
“Eight dollars is not cost-prohibitive for scammers. So it is essential that Twitter figures out this whole official or not issue,” said Rache Tobac from Social Proof Security.
“Right now, we have people making jokes, impersonating the president, impersonating Nintendo, and Elon Musk is laughing at those jokes because he thinks they’re funny right now. What’s not going to be funny is someone impersonating an election official. And meddling and causing interference with the election results,” she added.
Photo Credit: Jeff Chiu
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