Twitter Is Too Musk to Fail
Twitter’s finances are bleak, but Elon Musk would rather make it a money pit than allow it to buckle under
Elon Musk is showing that he is willing to dedicate resources to Twitter to save his reputation as a brilliant and unconventional businessman.
By Laura Forman, WSJ
Nov. 28, 2022 7:00 am ET
At least Elon Musk is having fun. Twitter’s new owner asked his nearly 119 million Twitter followers last week how one can make a small fortune on social media. His reply: “Start out with a large one.”
It is probably too soon for that #RIPTwitter hashtag, though. True, major advertisers are leaving the platform or pausing their business, thousands of employees have left, harebrained initiatives abound and offensive content is rampant. But if Mr. Musk’s first few weeks running Twitter have been a train wreck, few people seem able to look away.
The result is an all-time high in users, according to Mr. Musk. Wall Street was estimating Twitter would end the year with 256 million of them; Mr. Musk’s unaudited disclosures as of Nov. 20 imply it is currently on the path to hitting well over 266 million by the end of the year. That would make for nearly 23% growth over the fourth quarter of 2021—roughly in line with its growth rate in 2019 before the pandemic and 10 percentage points higher than in 2021.
Obviously those numbers are meaningless if the platform can’t survive financially. Mr. Musk’s suggestion earlier this month that bankruptcy is a possibility set off alarm bells. But he made similar statements about his other companies, Tesla and SpaceX, and they are still solvent.
Mr. Musk and his investors took on about $13 billion in debt to fund their $44 billion purchase, though, yielding an annual interest bill alone that is more than Twitter’s revenue in its last quarter as a public company. Some 90% of that revenue came from advertisers, many of which are at the very least taking a break from the platform for now. The thousands of jobs he has cut will save money but could also affect how well Twitter works or brings in customers.
When Mr. Musk said his decision to buy Twitter wasn’t about the money, he was likely referring to the platform’s purchase price, not the effect its failure could have on his overall net worth. His main asset, Tesla, even after a 48% slide so far this year, is worth nearly 10 times as much as General Motors. Most, or even all, of that premium is based on his aura as a brilliant and unconventional businessman.
Mr. Musk is already showing that he is willing to dedicate resources to Twitter to save that reputation. He is running the show full-time right now, for starters, when he could easily have appointed someone else, and has deployed Tesla engineers to Twitter’s problems. And after tweeting about the importance of avoiding an “emergency” sale of Tesla stock back in August if he was forced in court to go through with his purchase of Twitter, he recently sold another 19.5 million shares just days after the acquisition closed.
Elon Musk has warned of dire financial challenges facing Twitter, the social media company he took over for $44 billion in October. WSJ’s Mark Maurer explains how the company is trying to fix its finances and avoid a potential bankruptcy. Photo Illustration: Laura Kammermann
With 445 million Tesla shares still in his name as of last week, Mr. Musk has plenty more rabbits to pull out of just that hat, and he is a man who wears many of them. His options include somehow recapitalizing Twitter or perhaps buying its outstanding debt at a discount. In traditional business circles, his erratic behavior so far as “Chief Twit” and throwing good money after bad might be disqualifying. For someone whose wealth is tied to a financially unsophisticated crowd that reveres him for his apparent indifference to money and manners, though, letting Twitter crash and burn just isn’t an option.
Rumors of Twitter’s demise seem premature at best.
Write to Laura Forman at laura.forman@wsj.com
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