Elon Musk has a pretty toxic way of showing his love for Twitter. It is the social network that he chooses to make announcements to the world, and he has repeatedly confessed that he likes aspects of it such as immediacy and the ability to communicate directly with users, to the point that he has wanted to keep it completely for himself. But, at the same time, he has spent years criticizing many aspects of the platform, such as its moderation policies, and after breaking the agreement for its purchase, he has left it shattered, on the brink of an economic abyss.
With how handsome he seemed. When Musk announced that he had reached an agreement with the directors of the social network to acquire it, he seemed like the ideal suitor for Twitter: popular, innovative, with economic muscle and in love with the platform. At the time, that apparent suitability fired investor optimism, and the company’s shares, which had already surged when the buyout rumors began, hit their 2022 high of $51.70 a share on 25 May. of April, according to Google Finance.
That Musk publicly complained about the company with which he had just announced his commitment seemed more anecdotal than worrying. “Oh, this Elon, what he likes to attract attention.” Until things got really serious and on May 13, the tycoon announced that he was freezing the operation due to doubts about the real number of fake accounts on the social network. That turnaround caused shares of the company to jump from $47.26 on May 10 to $37.39 on May 16. Tremendous displeasure for those close to Twitter, with how good-looking he seemed.
stocks plunge. From that moment on, things got worse, with crosses of accusations about the veracity or not of the information of the false accounts and threats of rupture that, together with the difficult economic situation that the global economy is going through, have maintained the value of Twitter shares quite low. Finally, the final break announced last weekend has once again plunged the shares of the social network to 32.65 dollars.
These figures mean that in three months the shares of the social network have sunk 36.85%, and only this Monday 15.83%. So far this year, Twitter shares have lost 51% of their value.
And the worst may not have come, since it is foreseeable that investors will continue to be suspicious of Twitter in the coming months for two fundamental reasons: the poor global economic situation, which discourages spending and is already affecting other technology companies, and the prolonged litigation who is waiting for the social network with Musk, which is going to cause a lot of noise and instability in the company in the medium and long term. And you know, insecurity and turmoil are enemies of money.
less income. Added to the loss of attractiveness of its shares is the poor economic situation that Twitter is going through, a company that, like other technology companies whose income depends fundamentally on advertising, has seen its profits fall since the war in Ukraine shook international markets and caused companies spend less on ads.
In May, the social network’s CEO, Parag Agrawal, told his employees that they were freezing hiring due to declining advertising revenue, and last week Twitter announced its first layoffs for the same reason. And, as in the case of stocks, it does not seem that the worst is over in this section either, since the unfavorable economic context is long overdue and spending on ads will continue to be moderate.
Litigation spending. To the loss of value of its shares and the decline in advertising revenue is added a third factor that puts Twitter on the brink of the economic abyss: the tremendous expense in litigation that awaits it in the trial against Elon Musk to try to force the tycoon to comply with the purchase agreement or, at least, obtain the $1 billion compensation for breaking the deal that was established in a clause of the sale contract.
In fact, in the lawsuit that the social network has already filed against Elon Musk in the Delaware Chancery, Twitter has asked for an accelerated treatment of the case to protect its shareholders, According to the Wall Street Journal. Likewise, the company specifies that Musk has created a commercial risk for Twitter and downward pressure on his share price, accusations that those of Parag Agrawal hope will serve as aggravating circumstances against the South African tycoon.
If the trial goes well for Twitter, the purchase or payment of compensation would solve the problem, but if it loses, the social network will have to add the expenses of the trials to increasingly meager accounts. Musk has done a disservice to his, in theory, beloved social network.
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