Elon Musk says Twitter’s finances improving after big cuts

Musk said he had taken drastic measures to improve company’s financial health

Elon Musk said Twitter was recovering financially after seeing a 50 per cent decline in ad revenue, making one of his first public disclosures about the state of the social media company since he acquired it last year.

Speaking at a conference hosted by Morgan Stanley in San Francisco on Tuesday, Musk said he had taken drastic measures to improve the company’s financial health, slashing what he said was about $3 billion of operational expenses. After the cuts, the company has a chance of having positive cash flow in its second quarter, he said.

In the interview, conducted by Michael Grimes, a Morgan Stanley banker who helped broker Musk’s $44 billion acquisition of Twitter, the billionaire said the company would have gone bankrupt “in four months” if not for his cost cutting. Since his acquisition closed in late October, Musk has fired or laid off more than 3,750 employees, let vendors and landlords go unpaid, and eliminated cloud computing costs and one of Twitter’s three main data centers.

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“In the absence of action, Twitter would have had $6 billion in cost and $3 billion in revenue,” Musk said. He added that earlier projections had put costs at $4.5 billion and sales at $4.5 billion. Twitter recorded $5.1 billion in revenue in 2021 — up 37 per cent from the previous 12 months — in the last full year it reported financial results.

Musk, however, seemed to take little responsibility for the change in the company’s financial outlook. He owes what he says is $1.5 billion a year to service debt he took on to complete the deal. The decline in its ad sales, which in previous years accounted for about 90 per cent of the company’s revenue, happened amid an advertiser pullback as brands worried about increases in hate speech and misinformation.

He said the advertising decline was part “cyclic” and part “political” and blamed advertisers’ fears on portrayals of the company in the news media.

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“Believe what you see on Twitter and not what you see in newspapers,” Musk said.

Musk’s appearance came after Twitter dealt with a series of outages and glitches that have become more common under his ownership. On Monday, a bug left many users unable to click links, load images or access certain parts of the site.

Musk also spent part of Monday and Tuesday fighting on Twitter with a former worker. After Haraldur Thorleifsson, an employee in Iceland whose design company was acquired by Twitter, tweeted at the billionaire to clarify if he had been laid off, Musk accused him of using a disability as an “excuse” to not work and claimed he was seeking “a big pay out.” (Thorliefsson has muscular dystrophy and uses a wheelchair.)

Although Thorleifsson said on Twitter that he eventually did receive confirmation that he had been let go, he was still waiting for word as to whether he would be “paid what I’m owed per my contract.” Because his company was bought by Twitter, Thorleifsson had a higher compensation package than most employees and expected to be paid in full in the event that he was laid off.

“My company was acquired and as a result I had an obligation to work at Twitter for a certain period,” Thorleifsson said in an email sent to The New York Times. “I lived up to all aspects of my contract and now I need to wait and see if Twitter does the same.”

On Tuesday before speaking at the Morgan Stanley conference, Musk continued his attacks, calling Thorliefsson “the worst.” He later deleted the tweet.

Then, in a series of follow-up posts, Musk said he had a video call with Thorleifsson on Tuesday afternoon and apologized for his “misunderstanding.” Musk said he had offered Thorleifsson his job back.

“Better to talk to people than communicate via tweet,” Musk tweeted.