(Bloomberg) — Elon Musk, in his first address to employees of Twitter Inc. since buying the company for $44 billion, said bankruptcy is a possibility if it doesn’t generate more money, according to those familiar with the matter Persons.
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The warning came amid a tumultuous start to Musk’s tenure at the social media company — a two-week period during which he fired half of Twitter’s employees, fired most of its top executives, and ordered the remaining employees to be off to work from home. An executive who emerged as part of Musk’s new executive team as of Thursday, Yoel Roth, left the company, people familiar with the situation said. Another, Robin Wheeler, also resigned — but Musk persuaded her to go ahead, said some of the people, who asked not to be identified to protect personal and professional relationships.
While the takeover has removed Twitter from scrutiny of public markets, Musk has saddled the company with nearly $13 billion in debt that is now in the hands of seven Wall Street banks that failed to make it to sell them to investors.
Confidence in the company has eroded so quickly that even before Musk’s bankruptcy comments, some funds were offering to buy the loans for as little as 60 cents on the dollar — a price normally reserved for companies struggling financially, Bloomberg News reported Thursday.
In his address to employees, Musk issued several dour warnings. Workers should be prepared to work 80-hour weeks. There will be fewer office perks like free food. And he ended the pandemic-era flexibility that allowed employees to work from home.
“If you don’t want to come, resign accepted,” he said, according to a person familiar with the matter.
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When asked about the prospect of attrition, Musk said, “We all have to be tougher.”
Discussing Twitter’s finances and future, Musk said the company must act urgently to make its $8 subscription product, Twitter Blue, something users want to pay for amid a pullback from advertisers worried about make harmful content.
Musk has used threats of financial ruin to motivate employees in the past, according to a person familiar with his leadership style. He’s trying to convey the idea that if people don’t work hard, Twitter will be in a very difficult position, this person said.
The Information and Platformer previously reported on Musk’s bankruptcy filing.
He also pointed to products he’d like to launch, including payments, ads that tend to be more talkative, and interest-bearing checking accounts. Onboarding to the Twitter app should be smoother, as is the case with TikTok, he said.
Early Thursday, Twitter’s chief information security officer, chief privacy officer and chief compliance officer departed the company, raising concerns about the company’s ability to keep its platform secure and comply with regulations. Twitter is currently bound by a Federal Trade Commission consent decree governing the company’s handling of user data and could be subject to fines for violators.
Roth had since taken over all of the social network’s trust and security efforts, while Wheeler, a sales vice president, had recently stepped up oversight of relationships with nervous advertisers. She hinted at her decision to stay in a tweet as well as a post on an internal Slack channel.
The debt that Twitter took on to fund its Musk acquisition leaves interest costs that one estimate is set to grow to $1.2 billion a year.
The social network has seen a pullback from some advertisers concerned about Musk’s content moderation plans.
Debt investors and credit evaluators also show little confidence. The company’s banks have been quietly investigating hedge funds and other asset managers for their interest in buying some of the company’s debt.
Discussions so far have focused on the leveraged loan portion of the $6.5 billion financing, people with knowledge of the talks said. According to one of the people, the banks didn’t seem willing to sell for less than 70 cents on the dollar. Even at that level, losses could run into the billions, Bloomberg calculations show.
Moody’s Investors Service, meanwhile, recently downgraded Twitter’s credit rating deeper into junk territory. “Twitter’s governance risk is extremely negative, reflecting Moody’s expectations for aggressive fiscal policies and concentrated ownership of Elon Musk,” the rating agency said.
Musk warned employees of “difficult times” in an email late Wednesday without “whitewashing the message” about the company’s economic prospects. He ended employees’ ability to work remotely unless he personally approved it.
–Featuring Katie Roof, Davide Scigliuzzo, Gillian Tan, Claire Ruckin, Jill R. Shah and Lisa Lee.
(Adds details on Wheeler’s decision to stay in second paragraph)
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