(Bloomberg) — Elon Musk, in his first address to Twitter Inc. employees since buying the company for $44 billion, said bankruptcy was a possibility if it didn’t start generating more cash, according to people familiar with the matter.
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The warning came amid a tumultuous start to Musk’s reign at the social media company – a two-week stretch in which he fired half of Twitter’s staff, took out most of the top executives and ordered the remaining employees to stop working from home. An executive who until Thursday had emerged from Musk’s new leadership team, Yoel Roth, has left, people familiar with the situation said. Another, Robin Wheeler, also quit – but Musk persuaded her to stay, some people said, who requested anonymity to protect their personal and professional relationships.
As the takeover removed Twitter from public market scrutiny, Musk loaded the company with nearly $13 billion in debt that is now in the hands of seven Wall Street banks that have been unable to release them to investors.
Confidence in the company 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 typically reserved for companies judged in financial difficulty, Bloomberg News reported on Thursday.
In his address to staff, Musk issued several door warnings. Employees must prepare for 80-hour work weeks. There will be less office perks like free food. And it ended the pandemic-era flexibility that allowed employees to work from home.
“If you don’t want to come, resignation accepted,” he said, according to a person familiar with the matter.
When asked about the attrition prospect, Musk said, “We all need to be more hardcore.”
Discussing Twitter’s finances and future, Musk said the company needs to act urgently to make its $8 subscription product, Twitter Blue, something users will want to pay for, given the setback. advertisers concerned about harmful content.
Musk has in the past used the threat of financial ruin to try to motivate workers, according to a person familiar with his management style. He’s trying to convey the idea that if people don’t work hard, Twitter will be in a really tough spot, this person said.
The Information and Platformer previously reported Musk’s bankruptcy filing.
He also hinted at products he would like to introduce, including payments, more conversational ads, and interest-bearing checking accounts. Integration with the Twitter app should be smoother, as it is with TikTok, he said.
Earlier Thursday, Twitter’s chief information security officer, privacy officer and compliance officer left, raising concerns about the company’s ability to keep its platform secure. and comply with regulations. Twitter is currently bound by a consent decree with the Federal Trade Commission that regulates how the company handles user data, and could be subject to fines for violations.
Roth had since taken over all trust and safety efforts for the social network, while Wheeler, a vice president of sales, had recently taken over to oversee relations 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 Twitter took on to fund the Musk takeover leaves it with interest costs that one estimate will reach $1.2 billion a year.
The social network has seen pushback from some advertisers who are concerned about Musk’s content moderation plans.
Debt investors and credit assessors are also showing little confidence. The company’s banks have been quietly probing hedge funds and other asset managers for their interest in buying some of the company’s debt.
Talks so far have focused on the $6.5 billion portion of leveraged funding, people familiar with the talks said. The banks had seemed unwilling to sell at less than 70 cents on the dollar, according to one of the people. Even at that level, losses could reach billions of dollars, according to Bloomberg’s calculations.
Moody’s Investors Service, meanwhile, recently downgraded Twitter’s credit rating deeper into junk territory. “Twitter’s governance risk is highly negative, reflecting Moody’s expectations of aggressive financial policies and concentrated Elon Musk ownership,” the ratings firm said.
Musk, in an email late Wednesday, warned employees of “tough times ahead,” with “no way to water down the message” about the company’s economic outlook. He ended the ability for employees to work remotely unless he personally approved it.
–With help from Katie Roof, Davide Scigliuzzo, Gillian Tan, Claire Ruckin, Jill R. Shah and Lisa Lee.
(Adds details of Wheeler’s decision to stay in second paragraph)
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