(Bloomberg) – Elon Musk, in his first address to employees of Twitter Inc. since buying the company for $44 billion, saying bankruptcy is a possibility if it doesn’t start making more money, according to people familiar with the matter.
Most Read from Bloomberg
The warning came amid a tumultuous start to Musk’s reign at the social media company – a two-week period in which he fired half of Twitter’s staff, fired most of its top executives and ordered the rest of its employees to stop working from home. One executive who until Thursday had emerged as part of Musk’s new leadership team, Yoel Roth, is leaving, people familiar with the situation said. Another, Robin Wheeler, also resigned — but Musk persuaded him to stay, said multiple people, who requested anonymity to protect personal and professional relationships.
While his purchase has removed Twitter from public market scrutiny, Musk has saddled the company with nearly $13 billion in debt that is currently in the hands of seven Wall Street banks that have been unable to release it to investors.
Confidence in the company has grown so fast that even before Musk’s bankruptcy comments, some funds offered to buy loans for as little as 60 cents on the dollar – a price usually reserved for companies considered to be in financial distress, Bloomberg News reported. Thursday.
In his address to the staff, Kasturi issued some dour warnings. Employees must brace for an 80-hour work week. There will be little 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, your resignation is accepted,” he said, according to people familiar with the matter.
When he was asked about the prospect of attrition, Musk said, “We all have to be tougher.”
In discussing Twitter’s finances and future, Musk said the company needs to quickly make its $8 subscription product, Twitter Blue, something users will pay for, given pushback by advertisers concerned about harmful content.
Kasturi has in the past used the threat of financial ruin in an effort to motivate workers, according to a person familiar with his management style. He’s trying to convey the notion that if people don’t work hard, Twitter will be left in a tough spot, this person said.
The Information and Platformer previously reported Musk’s bankruptcy statement.
He also previewed the products he wanted to introduce, including payments, more conversational ads and preferred checking accounts. Onboarding to the Twitter app should be smoother, as in the case of TikTok, he said.
Earlier Thursday, Twitter’s chief information security officer, chief privacy officer and chief compliance officer left, raising concerns about the company’s ability to keep its platform secure and compliant with regulations. Twitter is now bound by a consent decree with the Federal Trade Commission that regulates how the company handles user data, and may be subject to fines for violations.
Roth has taken over the social network’s entire Trust and Security business, while Wheeler, vice president of sales, recently left to oversee jittery advertiser relations. He indicated his decision to stay in a tweet, as well as a post on an internal Slack channel.
The debt Twitter took on to finance Musk’s buyout is leaving it with interest costs that, by one estimate, will surge to $1.2 billion a year.
The social network has seen pushback from some advertisers who are concerned about Musk’s plans to moderate content.
Debt and credit rating investors are also showing little confidence. The company’s bank has been quietly sounding out hedge funds and other asset managers in their interests to buy a piece of the company’s debt.
Discussions so far have centered around the $6.5 billion leveraged loan portion of the financing, people familiar with the talks said. The bank seemed reluctant to sell for anything below 70 cents on the dollar, according to one of the people. Even at that rate, losses could run into the billions of dollars, Bloomberg calculations show.
Moody’s Investors Service, meanwhile, recently cut Twitter’s credit rating deeper into junk territory. “Twitter’s governance risk is very negative reflecting Moody’s expectations for aggressive financial policies and concentrated ownership by Elon Musk,” said the ratings firm.
Kasturi in an email late Wednesday warned employees of “difficult times ahead,” with “no way to get the message across” about the economic outlook for the company. He ended the ability of employees to work remotely unless he personally approved.
–With help from Lisa Lee, Katie Roof, Davide Scigliuzzo, Gillian Tan, Claire Ruckin and Jill R. Shah.
(More details on Wheeler’s decision to stay in the second paragraph)
Most Read from Bloomberg Businessweek
©2022 Bloomberg LP