Elon Musk Says Twitter is Nearing ‘Breakeven’ Even as Controversies Rage On

Elon Musk, who acquired Twitter in October 2022 has said that the social media company is now “trending to breakeven.” The billionaire had previously flagged Twitter bankruptcy concerns and said that it was losing $4 million a day.

Musk acquired Twitter at a valuation of $44 billion. He himself admitted that he overpaid for the company. He was apparently looking to renegotiate the deal at better terms. However, Twitter took him to court for backing out of the acquisition. Tesla’s CEO finally relented and bought Twitter at the original terms.

Musk says Twitter is trending toward breakeven

It’s been just over three months since Musk acquired Twitter and took it private. However, it has been chaos so far and Musk has made several changes at the company. He admitted that the last few months have been “extremely tough.” He however expressed optimism over Twitter moving towards breakeven.

Soon after he took over, Musk fired many Twitter employees, including the top brass. The company’s then CEO Parag Agrawal was reportedly escorted out of the office. Many more Twitter employees quit after Musk asked them to commit to “hardcore” work.

Twitter had nearly 7,500 employees when Musk took over. While a CNBC report said that the company’s full-time employees are down to a mere 1,300, Musk said that the number is closer to 2,300. All said, even going by Musk’s numbers, the company’s workforce is down by almost 70%.

Twitter has laid off many employees

Incidentally, when Musk was acquiring Twitter, there were reports that he would fire around 75% of the workforce. Back then, he had categorically denied that he would lay off so many employees.

Twitter is also facing lawsuits from several entities including landlords, a software provider, an M&A advisory company, and a jet company. The company allegedly failed to make the due payments which forced the affected parties to file the lawsuit.

Some reports even suggest that Twitter employees were forced to carry their own toilet papers to the office.

Musk is mostly in controversies

Like almost everything associated with Musk, the acquisition was full of drama. Musk made an offer to buy Twitter at $54.20 per share but the company’s board declined his offer. Eventually, the board relented as Musk’s offer price was way above Twitter’s stock price.

However, Musk subsequently backed out of the deal pointing to the alleged fake accounts on Twitter. Twitter sued Musk calling upon the billionaire to honor his deal. Amid the legal battle, Musk agreed to buy Twitter at the original terms.

Since then, Musk took several decisions which irked even some of his fans. For instance, he has restored several suspended accounts including that of former President Donald Trump. Trump incidentally is not keen on joining Twitter again and is instead connecting with his supporters on Truth Social, his own social media platform.

Twitter to charge for API access

Musk also briefly suspended the accounts of many journalists but quickly reversed the decision. Twitter also stopped providing free API access. However, in a partial rollback of that decision, Musk said that bots providing “good content” would keep getting the API for free.

Twitter would also reportedly charge $1,000 for the gold verification for companies. It has already started to charge for the blue tick verification. The company charges $8 monthly if the subscription is taken on the web. However, the price rises to $11 for subscriptions on Apple and Google app stores.

The higher pricing on app stores is apparently to offset the fees that these platforms charge.

Twitter ad revenues have plummeted

Twitter ad revenues have meanwhile plummeted since Musk took over. Musk himself admitted to the exodus of advertisers from the platform. However, we still don’t have any official data on the company’s ad revenues. Given the fact that Twitter is no longer a publicly traded company, we might not get a hard number on its ad revenues, which before Musk’s acquisition accounted for the bulk of its revenues.

However, analysts estimate that Twitter’s daily ad revenues have fallen by as much as 70%. If Twitter has still managed to trend to break even as Musk claims, it is an achievement. Notably, Twitter also has an additional interest outgo of around $1 billion for the loans that Musk took to acquire the company.

Tesla stock plunged in 2022

Tesla stock also reacted to the drama over Musk’s Twitter acquisition. The stock fell after Musk proposed to buy Twitter. Musk already splits his time between Tesla, SpaceX, and some of the other companies that he owns. Markets fear that he would end up spending more time at Twitter when he should be spending his energies at Tesla.

He has offered to resign as Twitter head once he finds someone else who can do the job. Even some of the die-hard Tesla bulls see Musk’s Twitter acquisition as a negative for Tesla stock.

Wood believes many might not but Tesla cars now

Cathie Wood of ARK Invest admitted that some people might not buy Tesla cars. However, she is still quite bullish on the company and added more Tesla shares after it crashed. 2022 was in fact the worst year for Tesla stock as it lost 65% in the year.

Tesla stock has meanwhile rebounded and has almost doubled from its recent lows. It posted better-than-expected earnings for the fourth quarter of 2022 after having previously missed the delivery estimates.

Tesla said that it expects to produce 1.8 million cars in 2023. During the earnings call, Tesla’s CEO Elon Musk said that while its internal production goal is 2 million cars, it is providing conservative guidance.

Musk says Twitter acquisition not impacting Tesla brand

Another investor concern has been the damage to Tesla’s brand ever since Musk acquired Twitter. Multiple surveys have shown that Musk’s Twitter ownership negatively impacted Tesla brand

Musk answered the popularity question by pointing to his 127 million Twitter followers. He said, “That suggests that I’m reasonably popular. It might not be popular with some people, but for the vast majority of people, my follower count speaks for itself. I have the most interactive account — social media account, I think, maybe in the world, certainly on Twitter, and that actually predated the Twitter acquisition.”