The Finance Side of the Twitter Story


There are always two sides to every story, especially when it comes to business.
Let us dive deep into the financial side of the Twitter story.

Elon Musk abruptly took over Twitter on October 26, 2022.

After closing a $44 billion deal for the social media platform, he entered Twitter’s headquarters. He fired the company’s top three executives: CEO Parag Agarwal, CFO Ned Segal, and Chief Legal Officer Vijaya Gadde.

Social media and news portals have a general tendency to exaggerate events.
But in this story, things were so dramatically woven that even social media seemed helpless when blowing it out of proportion. After all, how much bigger can a news story get blown?

TWITTER has had a challenging decade, and Elon Musk was advocated as the right solution to the company’s financial problems.

Twitter’s financial situation before Musk

Since its inception in 2006, Twitter has grown into a popular medium for politicians, celebrities, and journalists to communicate with their audiences, and it continues to maintain that position to this day. However, the company has struggled financially and has not made a profit in the last eight years.

The company had less than $600 million in net debt before the takeover talks.
Twitter has historically struggled to attract new users, according to experts.
Furthermore, it has been fighting bad PR for a few years, with allegations of misinformation, violent discourse, bullying, and, of course, the antics of former US President Donald J. Trump.

Before Elon Musk completed his takeover, Twitter was worth $37.48 billion in March.
Since then, social media stocks have plummeted precipitously.
Mr. Musk has stated that investors were paying more than the company was worth.
Twitter’s actual worth may be closer to the debt stack.

Elon enters the fray.

The takeover story began earlier this year when Elon Musk offered to buy 100% of the company for $54.20 per share. He believed that Twitter was losing its primary purpose as a platform for free speech. He believed that the company could not solve its problems in its current state and that it needed to go more private.

The announcement caused quite a stir in the media and on social media, with many claiming Mr. Musk is the right man to turn Twitter’s fortunes around. This isn’t too far-fetched given his accomplishments at Tesla, the world’s leading electric car company, and SpaceX. But this appears to be different.

Mr. Musk began his tenure at Twitter with dubious decisions that raised questions about the company’s future.

According to the Wall Street Journal, this prompted top corporations to halt ad spending until they had more certainty about the future.

Long-term contract negotiations have also been put on hold.
This is a massive blow to the company because advertising accounts for more than 30% of total revenue.

What does Twitter’s financial future look like now?

Revenue will most likely remain under pressure until advertisers fully understand the new business model, which could lead to many returning to the platform. Advertisers will return if they believe the users are present and there is an opportunity to monetize their advertisement, but this may take time.

Meanwhile, Mr. Musk wants the company to rely more on subscriptions and less on digital advertising. The worst-case scenario is that Twitter’s financial difficulties force the company to declare bankruptcy, raise equity, or buy back some of its debt from its lenders.

Cash is king during times of crisis, which is especially true in this case.

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