Elon Musk blames Twitter cost cuts for “$3 billion negative cash flow.”
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Elon Musk has defended his financial responsibility for Twitter, arguing that without his controversial cost-cutting efforts, the social media platform would have faced a “negative cash flow situation of $3 billion a year.”
The billionaire entrepreneur, who bought the social networking company for $44 billion in October after previously trying to go out of business, gave a snapshot of his dismal finances during a Twitter Spaces online forum on Wednesday .
“We have an emergency fire drill on our hands. . . This company is like an airplane that’s going to the ground, running at high speed, the engines are on fire and the controls don’t work,” he said. “This is the reason for my actions, which at times may seem wrong.”
He said the platform will spend about $5 billion in 2023. Total expenses at Twitter in 2021, the last period the company reported before privatization, was $5.6 billion, during which pre-tax loss was $221,409.
Musk predicted that if you don’t make changes, Twitter’s net cash outflow would be about $6 billion to $6.5 billion over the next year. That’s partly because the company has been saddled with $12.5 billion in debt to fund its acquisition, which requires about $1.5 billion in debt service payments annually as interest rates rise, he said.
“Not good since Twitter has $1 billion in cash,” he said. “That’s why I’ve spent the last five weeks cutting costs like crazy.”
His remarks suggested the company was on track to hit about $3 billion in annual sales next year. That would suggest Twitter is on track to lose up to $2 billion in revenue compared to the $5 billion it made in 2021 mostly from advertising. Many marketers have withdrawn from the platform since Musk took on moderation concerns.
The picture of Twitter’s finances comes after Musk laid off about half of its 7,500 employees and cut benefits, raising concerns about whether the company is understaffed in areas like content moderation and compliance.
Musk tweeted on Sunday that Twitter has been “on the fast track to bankruptcy since May.”
However, Musk said on Wednesday that the changes he made would mean the company would “roughly” break even on cash flow.
“With the changes we’re making here to massively reduce the burn rate and increase subscriber revenue, I now think Twitter will actually be fine next year,” Musk said, adding that he’s with Talked to advertisers who pushed him to show how Twitter could generate a return on investment.
The Tesla and SpaceX CEO has previously hinted that he plans to transform Twitter into an “everything app,” where users can send money or shop, for example, to generate new revenue streams, including payments and subscriptions.
However, an attempt to launch a new premium subscription service, Twitter Blue, was fraught with challenges after some users took advantage of a paid “Blue Tick” verification offer to impersonate others, leading to the company being paused and later restarted operation.
Late Tuesday, Musk said he would step down as Twitter boss once he found someone “dumb enough to take the job,” following the results of a poll of the platform’s users he conducted over the weekend had.
Musk also hinted that he will continue to lead the company’s “software and server teams” after stepping down, suggesting he will remain closely involved in the social networking site’s day-to-day operations and product development.
Additional reporting by Richard Waters in San Francisco
