Sat, June 15, 2024

Musk Calms Investors Despite Negative Cash Flow

Musk Calms Investors Despite Negative Cash Flow

Before Twitter Inc. reduced costs through layoffs, it was on track to have a $3B yearly negative cash flow. “That is why I spent the last five weeks cutting costs like crazy,” Musk said during a tweet-spaced discussion on Tuesday evening. “That’s the reason for my actions. They may sometimes seem spurious or odd or whatever. It’s because we have an emergency fire drill on our hands.” “This company is like, basically, you are in a plane that is headed toward the ground at high speed with the engines on fire and the controls don’t work,” he said. 

Since 2019, Twitter hasn’t made a yearly profit or posted a loss, and the last decade has been its worst. In 2021, the firm posted a net loss of $221.4M, down from $1.14B in the previous year. Mr. Musk is implementing recent changes at the firm, including cost-cutting initiatives and subscriber revenue generation. Musk projected that the firm would be a cash flow break-even next year.

“I now think that Twitter will, in fact, be OK next year,” Musk claimed.

Musk is also the CEO of Tesla Motors Inc. He finalized the purchase of Twitter for $44B in October, bringing the company’s debt to about $13B.

Liabilities Are Mounting

According to a review of Twitter’s loans, the company may have to pay at least $9B in interest to banks and hedge funds. This is set over the next seven to eight years when the $13B debt matures.

Mr. Musk has previously expressed his dissatisfaction with Twitter’s finances. Twitter has experienced a “substantial decline in income” and is losing $4M daily; he claimed last month. He eventually brought up the issue of bankruptcy.

After a week, the company began layoffs, which still caused negative cash flow. Last month, a large number of employees resigned. Musk urged his staff to accept a severance package or stay at work long hours. Twitter now employs “a little over 2,000 people,” according to Musk.

Mr. Musk also spoke about his attempts to keep sponsors on the platform after a departure last month. He claimed Tuesday that he has contacted a variety of companies and that they have complied with his requests. Many people, he added, desire to see strong return-on-investment projections.

Advertising accounts for about 90% of the company’s income. It has been Musk’s primary focus. On December 12, Twitter re-launched its paid-for subscription service after several false starts, charging users who sign up through an Apple Inc. Those who join via a web browser pay $8 per month, whereas those who use mobile devices pay $11.

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