Elon Musk could be backtracking on the acquisition of Twitter. According to three sources who spoke to The Washington Post, Musk and investors believe that Twitter’s bot/spam/fake account data is unverifiable and have cast doubts on the microblogging platform’s prospects as a business. Meanwhile, Twitter has laid off 30% of its recruitment staff.
The latest development comes almost two months after the $44 billion deal was put “on hold†in May because Musk had apprehensions about Twitter’s disclosure made through a filing in the same month that the number of bots, spam or fake accounts was below 5% of the total users.
In June, Twitter opened up its firehose, i.e., the company’s live stream of user-generated data, to assuage concerns that bots, spam or fake accounts constitute fewer than 5% of all Twitter users. But it doesn’t look like Musk and his investors are buying it.
More importantly, Musk and his investors, including Oracle’s Larry Ellison, VC firm Andreessen Horowitz, Binance, and the Qatari state investment firm, do not believe they have enough information to proceed. As such, they have “stopped engaging in certain discussions around funding,†according to the Post.
Earlier this year, the billionaire CEO of Tesla and SpaceX announced grand plans for Twitter, both as a business and as its role in enabling free speech. Between then and now, a lot has changed.
Besides controversies such as sweeping the story of him flashing a SpaceX flight attendant and fathering twins with his direct report at Neuralink (another company he co-founded), the possibility of a recession is also hitting Twitter hard.
Twitter shares hit a 52-week low of $31.3 before gaining traction for a few weeks when Musk’s intent to buy the company became public knowledge. Since mid-May, Twitter’s share value has been hovering between $35 to $40, the same level before Musk announced his plans. Nevertheless, the share value is far from its 52-week high of $73.34. The company made a net profit only inOpens a new window 2018 ($1.2 billion) and 2019 ($1.46 billion) since it went public.
The deal is subject to a termination fee of $1 billionOpens a new window owed by either of the two parties that reneges on the acquisition.
Musk, the largest individual Twitter shareholder and the second-largest overall with a 9% stake, was offered a seat on the Twitter board. He rejected it and came back with a $44 billion cash truck to take over the entire company, for which he originally faced resistance.
The roller coaster ride seemed to have ended when Musk remotely joined a town hall at Twitter in June and spoke with employees about his plans for the company, including a return to in-office work, possible layoffs and scaling up to one billion users.
See More: Meta Tells Employees to Brace for “Serious Times†in Leaked Internal Memo
Musk has no power over Twitter’s affairs, but his plans to shed excess resources have already begun. Techcrunch confirmed that Twitter laid off 30% of its talent acquisition team today.
Ingrid Johnson, a senior technical recruiter at Twitter who was laid off recently, posted on LinkedIn: “Twitter layoffs started today. There are people losing their jobs that have been there for over a decade.â€
So far, the layoffs haven’t impacted the technical staff. At the town hall, Musk said, “The company does need to get healthy.†When asked who would be fired, he responded, “It depends.†Considering Musk believes that Twitter’s “costs exceed the revenue,†the decision will possibly be based on the company’s performance and financials. Twitter made a $1.136 billion loss in 2020 and a $221 million loss in 2021.
In the meantime, Twitter instituted a hiring freeze in May, which is not uncommon for a company undergoing an acquisition. Twitter also saw a top-level shake-up wherein two executives, revenue product lead Bruce Falck and GM and head of consumer product Kayvon Beykpour were shown the door.
While I expect the deal to close, we need to be prepared for all scenarios and always do what’s right for Twitter. I’m accountable for leading and operating Twitter, and our job is to build a stronger Twitter every day.
— Parag Agrawal (@paraga) May 13, 2022Opens a new window
Tech companies are undergoing a flux. Like Twitter, Meta has alerted employees of “leaner†teams and slowed hiring. In a memo, meta’s chief product officer Chris Cox told employees, “I have to underscore that we are in serious times here and the headwinds are fierce. We need to execute flawlessly in an environment of slower growth, where teams should not expect vast influxes of new engineers and budgets.â€
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