Elon Musk has defended his handling of Twitter’s finances, saying that without his contentious cost-cutting measures, the social media platform would have been in “negative cash flow situation of $3 billion a year.”
The multi-billionaire businessman, who unsuccessfully tried to back out of the October $44 billion purchase of the social networking company, provided an overview of its precarious financial situation on Wednesday during a Twitter Spaces online forum.
“We have an emergency fire drill on our hands . . . This company is like you’re in a plane that is headed towards the ground at high speed with the engines on fire and the controls don’t work,” he said. “That’s the reason for my actions that may seem sometimes spurious.”
According to him, the platform was on track to spend about $5 billion in 2023. The final financial year Twitter reported before going private in 2021 had total costs of $5.6 billion and a net loss of $221 million.
Musk anticipated that Twitter would lose money. “if you didn’t make any changes”, would be about $6bn to $6.5bn next year. This is partly because the company has been loaded with $12.5bn of debt to help to fund his acquisition, which required about $1.5bn a year in annual debt servicing payments amid rising interest rates, he said. “Not good since Twitter has $1bn in cash,” he said. “So that’s why I spent the last five weeks cutting costs like crazy.”
He said the business was on track to generate about $3 billion in revenue the following year. That would indicate Twitter was on track for revenues in 2023 that could be as much as $2 billion lower than the $5 billion it earned in 2021, which came primarily from advertising. Because of worries about content moderation, many marketers have left the platform since Musk took control.
The financial picture of Twitter comes after Musk terminated about half of its 7,500 employees and took away their benefits, raising questions about whether the business has enough employees to handle tasks like content moderation and compliance.
Twitter had been “in the fast lane to bankruptcy since May,” Musk claimed in a tweet on Sunday.
