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Twitter’s Earnings Falter as It Fights with Elon Musk

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Twitter is involved in a tough court battle with Elon Musk as Elon Musk seeks to cancel its $ 44 billion acquisition. Hiring is delayed due to the economic downturn. The stock price is falling.

On Friday, Twitter revealed the sacrifices from those challenges.of Revenue reportThe company said the uncertainty caused by Mr. Musk, along with macroeconomic problems, had hit the business. Twitter’s quarterly revenue fell for the first time since 2020 as it struggled to become an advertiser’s destination and turned into a net loss.

The slump in earnings reports has fueled a game of blame that broke out between Twitter and Mr. Musk. Mr. Musk swooped in and out of the company’s lack of business and financial prospects by going back and forth between purchases of social media services. Musk, who heads electric car maker Tesla, agreed to buy Twitter in April and said it would keep it private. He personally told investors that by 2028 the company’s revenue could be quintupled and expanded to 9.31 million users in the same year.

But as the stock market shook and pulled down Tesla’s stake, which was his main source of wealth and lost one-third of its value this year, Musk made more and more harsh comments on Twitter. .. This month he moved to close his deal. Since then, Twitter has appealed to him to complete the purchase, and a five-day trial to rule the matter is scheduled for October at the Delaware Chancery Court.

Mike Proulx, Forrester’s Research Director, said: “None of these are suitable for Twitter.”

Twitter said in its earnings announcement that the disappointing result was due to “the headwinds of the advertising industry related to the macro environment and the uncertainty associated with the pending acquisition of Twitter by Elon Musk’s affiliates.”

In total, second-quarter revenue was $ 1.18 billion, down 1% year-on-year. This is far from the 20% growth that was once predicted for the year. Twitter revenue fell 2% from the first quarter to the second quarter. This is roughly in line with the period immediately before and after Mr. Musk’s move to the company.

The company’s net loss was $ 270 million, a significant decrease from the previous year’s $ 66 million profit due to increased costs and costs.

There was one bright spot. According to Twitter, the number of active users per day who saw the ad was 237.8 million, an increase of nearly 17% over the previous year.

Mr. Musk did not respond to the request for comment.

In recent months, Twitter and other social media companies have faced a dark advertising market. Concerns about the recession and the Ukrainian war are holding back advertising spending, which social media companies rely on for the majority of their revenue.

On Thursday, Snapchat maker Snap reported that it had the slowest quarterly growth ever and the highest losses. Snap’s stock plunged more than 38% in early Friday trading, pushing its market capitalization to less than $ 17 billion.

Twitter and Snap revenue can be a bad sign for other internet companies that rely on advertising for most of their revenue. Facebook’s parent companies Meta and Google will report revenue next week.

Twitter faces further concerns from advertisers about the potential acquisition by Mr. Musk, who said he hates ads and wants to relax Twitter’s content moderation policy, which prevents ads from appearing with offensive content. doing.

Twitter CEO Parag Agrawal has hired the company to cut costs, fire top executives and ignore Musk’s fireworks in recent months as the company isn’t reaching its full potential. I told the employee that I recommended it to the employee.

Still, the economic headwinds Twitter detailed on Friday wouldn’t be a big concern for current shareholders if the court forced Mr. Musk to take ownership of the company at a suggested price of $ 54.20 per share. Maybe, research firm LightShed Partners.

“The funny thing is that revenue doesn’t matter,” he said. “After all, if they sell the company for $ 54.20, it’s an Eron issue, not a market issue.”

Twitter’s share price was $ 51.70 on April 25, when the company’s board accepted Mr. Musk’s offer. However, stock prices have fallen sharply since then, falling below $ 40 last month. In early Friday trading, the stock fell by less than 1 percent.

Greenfield added that investors would only be concerned about Twitter’s earnings if the deal collapsed and the fundamentals of the company’s business regained its importance. “We know that if a transaction collapses completely, inventories will decrease,” he said. “But the question is,’How much?'”

Musk also accuses Twitter of misleading investors and underestimating fraudulent accounts on the platform. According to the company, these accounts account for less than 5% of active users on the platform and use experts to audit that number. Twitter repeated this number as follows: Friday filing..

As the battle with Mr. Musk unfolded, Twitter tried to avoid the spotlight. For the second quarter in a row, the company refused to hold a financial results briefing with Wall Street analysts, avoiding unpleasant questions about Mr. Musk’s business implications.

“The company is very quiet,” Greenfield said. “It’s been a few months since the investor talked to the company.”

Musk also faces business concerns in Tesla. Automakers reported on Wednesday that quarterly profits declined due to supply chain delays and the price of Bitcoin invested by the company.

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