Amid Elon Musk’s struggle to make Twitter profitable, his next challenge is growing closer and closer: the company’s next debt payment. The social media platform he owns is reportedly facing a $300 million interest payment on its debt this week, despite the company’s difficult financial situation, say reports. The billionaire is expected to make an interest payment before the January 27 deadline.
But can he do it?
It’s not certain, but reports speculate also on Musk’s volatile bent of mind. Musk, after taking over Twitter has hinted at bankruptcy before and has also sold Twitter’s bird statue, fetching a price of $10,000. Desperate times beget desperate measures? Perhaps so, and not to forget the retrenchments the company has seen.
First, Let’s See How Much Musk Has To Pay
According to a report by the Guardian, Musk must make the first quarterly payment on the $13 billion in debt he used to purchase Twitter by the end of the month. Analysts estimate the amount to be around $300 million, or roughly one-quarter of the estimated $1.2 billion in annual interest payments due.
The debt, which is on Twitter’s balance sheet and is loaned by a consortium of banks led by Morgan Stanley, consists of three components:
- a $6.5 billion senior secured term loan facility (a bank loan)
- a $3 billion senior secured bridge loan facility (a loan to tide the company over post-acquisition that is traditionally paid off with bond proceeds)
- A $3 billion senior unsecured bridge loan facility.
Twitter also has a $500 million senior secured revolving facility, which functions similarly to a corporate overdraft, the report says.
How Has Twitter Been Actually Doing?
All is definitely not well. According to a Guardian report in November, Musk slashed up to half of the company’s workforce with little notice and abruptly cutting off employees’ access to their computers and work systems within the first week of his takeover.
Musk had also revealed that brands had begun pulling their advertisements, resulting in a “massive drop in revenue." He tweeted late Friday the cuts were needed as “unfortunately there is no choice when the company is losing over $4m/day".
Audi, General Motors, General Mills, and Pfizer are among the companies that have suspended advertising due to concerns that Musk will reduce misinformation and security safeguards on the platform. Twitter’s revenue is 90% derived from advertising.
According to estimates compiled for Reuters by research firm Pathmatics, top advertisers on Twitter cut their spending following Musk’s takeover. Pathmatics estimates say 14 of the top 30 advertisers on Twitter stopped all advertising on the platform after Musk took over on October 27. From the week before Musk’s acquisition to the end of the year, four advertisers cut their spending by 92% to 98.7%.
Pathmatics said overall advertising spending by the top 30 companies fell by 42% to an estimated $53.8 million for November and December combined, despite an increase in spending by six of them, a report by Economic Times said.
But Why are Advertisers Pulling Out?
Just four days before the US midterm elections, in which hundreds of politicians are running for election, there were claims Twitter’s “entire" curation team had been affected, potentially jeopardising the company’s ability to counter misinformation, with one moderator warning of a risk content could become “more toxic".
According to reports, the public relations team in charge of managing communications with journalists and other organisations has also been drastically reduced. Members of those departments told the Guardian that other groups that have been dissolved include the company’s human rights team, as well as the machine learning and algorithmic ethics teams.
So Can Musk Really Do It?
Musk told a podcast last month that Twitter is “not on the fast lane to bankruptcy any more". He also stated that Twitter has a net cash position of $1 billion, which would at least cover next week’s payment as well as the $500 million overdraft, the report explained.
“Twitter should have no trouble making its interest payment in late January," Jordan Chalfin, senior analyst at credit research firm CreditSights told the Guardian. “In the long run, the company must turn around the business, particularly its advertising revenue, to service its debt."
How Can Musk Better Moderate Content; Attract Advertisers?
There are also questions on whether Musk can handle moderation amid influences of various kinds. Aarlan Marshall, in a report by the Wired, tackling that very question, remarking that Musk was recently faced with a tough moderation decision after Ye’s actions, and that the ‘moderation assignments will only get more complicated from here.’
“The longer he owns the site, the more likely he is to face a challenge with political entanglements. And research has suggested that hate speech has already become more visible on Musk-run Twitter," the report comments.
Another Wired report says that before and after Elon Musk purchased Twitter at the end of October, researchers from the Digital Planet group at Tufts University monitored the spread of hate speech on the social media platform.
In order to accomplish this, they made use of a data stream offered by the platform and referred to as the firehose. This stream is a feed that contains every public tweet, like, retweet, and reply that is shared on the platform. The same method was utilised by the group in previous studies, such as the one that investigated the toxic content that was posted on Twitter in the lead up to the midterm elections in the United States.
In order to investigate how Musk’s ownership of Twitter affected its culture, the researchers conducted a search of tweets that were published between March 1 and November 13 of this year. They then compiled a list of the 20 tweets that contained keywords that could point to anti-LGBTQ+, racist, or antisemitic intent, and chose the tweets with the highest number of followers, likes, and retweets. After that, they went through each of the three categories’ tweets, analysed the language used, and made an attempt to determine the authors’ true intentions.
A single tweet out of each of the three top 20 lists was identified by the researchers as being actually hateful during the months leading up to Musk’s takeover. In this particular instance, the tweet targeted Jewish people. The others were either paraphrasing the hateful statements made by another person or using the relevant key words in a context free of hateful connotations.
The same analysis found that in the weeks after Musk took over Twitter, hateful tweets became much more prominent among the most popular tweets with potentially toxic language. Seven of the top 20 posts in each category of tweets that used words associated with anti-LGBTQ+ or antisemitic posts were now hateful. One of the most popular tweets that used language that could be construed as racist was ranked among the top 20 tweets that were considered to be hate speech.
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