Elon Musk said Twitter’s cash flow remains negative because of a nearly 50% drop in advertising revenue and a heavy debt load. He also said the company will “need to reach positive cash flow before we have the luxury of anything else.”
The Tesla and SpaceX CEO took over Twitter in October last year in a deal valued at $44 billion, including about $13 billion in debt. After the takeover, he made several controversial choices at the social media company, including mass layoffs and changing its approach to content moderation. These changes led to many advertisers turning their backs on the platform.
In April, he told BBC that most of the advertisers who left had returned and that Twitter could become cash-flow positive in the second quarter. Recently, the company started doling out a share of ad revenue to select content creators on its platform.
On Saturday, Musk sounded much more cautious, saying the current situation was worse than expected and that Twitter will need to make further cuts and changes. He said the company was still losing money, and it would be “a while” before Twitter could see increased advertising revenues.
Among the changes, the company has required all users to verify their identities to use its online dashboard TweetDeck, which news organizations and companies widely use. The new policy is set to start next month. The company is also cutting its costs by reducing its cloud service bills. The new measures have helped reduce Twitter’s expenses, but more is needed to offset the losses from the ads sales decline and the increased spending on data security.
Twitter is on track to report around $3 billion in revenue this year, a far cry from the $5.1 billion it reported in 2021. The company has been criticized for lax content moderation, leading to an exodus of advertisers who don’t want their ads appearing around inappropriate material. The hiring of Linda Yaccarino, former ad chief at Comcast’s NBCUniversal, as the new CEO, has signaled that increasing ad sales will remain a priority for the company.
Musk also said the company must raise additional capital to help it through a transition period. He did not provide a specific time frame for when that might happen or what the amount of the financing would be.
It is still being determined if the additional funding will come from investors or other outside sources. His comments suggest that the company may use public markets to raise funds. Several technology firms have filed for protection from creditors after the tech meltdown that has seen many big-name businesses collapse in recent months. Many companies struggle to find funding due to investor worries about overexposure to risky investments. The tech sector has been among the hardest hit by the recent selloff in stock prices and high borrowing rates.
