 "Elon Musk writes to X employees, says company 'barely breaking even'")
Elon Musk's ambitious acquisition of Twitter, now rebranded as X, is facing significant financial hurdles, according to an internal email sent by Musk to employees, accessed by The Wall Street Journal. The billionaire entrepreneur admitted the platform is “barely breaking even,” citing stagnant user growth and underwhelming revenue.
Musk purchased Twitter for $44 billion in October 2022, a deal financed in part by $13 billion in debt. Banks such as Bank of America, Barclays, and Morgan Stanley, which underwrote the acquisition, are now attempting to offload portions of the debt, as reported by The Wall Street Journal. The financial strain includes annual interest payments exceeding $1 billion, further complicating X's path to profitability.
Elon Musk's acquisition of Twitter
In October 2022, Elon Musk, the CEO of Tesla and SpaceX, completed the acquisition of Twitter for approximately $44 billion, paying $54.20 per share. This move was part of Musk's vision to transform Twitter into "X," an all-encompassing app inspired by platforms like WeChat.
Following the acquisition, Musk implemented significant changes, including rebranding Twitter as X and overhauling its content moderation policies. He also reduced the company's workforce by about half and introduced new features aimed at enhancing user experience.
However, these changes have been accompanied by challenges. According to estimates by investment giant Fidelity, X's value has declined by nearly 80 per cent since the acquisition, with advertising revenue losses contributing significantly to this downturn. Additionally, user engagement has decreased, with mobile usage dropping by 17.8 per cent year-over-year.
Decline in advertising revenue
In the email, Musk acknowledged X's role in “shaping national conversations and outcomes” but tempered this with a sobering assessment of its performance. The platform has struggled to retain advertisers, a challenge exacerbated by the rise of competitors like Bluesky and Threads.
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The decline in advertising revenue is partly attributed to concerns from advertisers about their ads appearing alongside hate speech, following Musk's relaxation of content restrictions. In response, X CEO Linda Yaccarino has assured stakeholders that efforts are underway to regain advertiser trust and bring them back to the platform.
Despite these setbacks, Musk has introduced several initiatives to rejuvenate the platform, including job listings, a dedicated video section, and the integration of GrokAI, an AI-powered feature designed to enhance user engagement. However, these efforts have yet to translate into substantial revenue growth.