Social media network Twitter is still reeling from the backlash of tech mogul Elon Musk’s apparent desertion of his bid to take it over.
Twitter reported a record loss of $270 million in its first earnings report following Musk’s “termination” of the deal. The company reported total second-quarter revenue of around $1.2 billion, slightly under the $1.3 billion average that analysts previously forecast. Twitter’s revenue was also down 1% from the same quarter in 2021.
Analysts opine that uncertainty regarding the social network’s future following Musk’s withdrawal and its subsequent legal issues are what dragged down its Q2 earnings. Twitter executives also blamed more pressing economic issues for the substantial reductions in its quarterly revenue.
Twitter’s stock futures also decreased by 2% ($38.50) around its earnings announcement, while share prices have gone down by 40% over the past several months, even as the S&P 500 fell by around 16%.
Among other disclosures made during the announcement were that Twitter has already spent $33 million during the second quarter, mostly on expenditures related to the Musk acquisition. An additional $9 million was spent as compensation for employees laid off over the past year, including around a third of Twitter’s recruitment team.
A Difficult Time
Since Musk acquired 9% of the company in April, Twitter’s share value has fluctuated wildly. Musk’s subsequent announcement some weeks later about buying the company at a massive premium, then opting to terminate the deal earlier this month have also adversely affected the social network’s financial performance.
As Musk was poised to take the company over in May, share prices surged by around 60%. Still, they plummeted sharply following his allegations regarding fake accounts and the proliferation of spam on the platform.
When Musk decided to renege on the acquisition last May 8th despite the approval of Twitter’s board of directors regarding the purchase, shares were driven down by nearly 40% of their value back in April.
As of July 12th, Twitter executives have filed a class action against Musk for reneging on the acquisition. A judge in Delaware has ordered the mogul to push through with it and has scheduled a trial between the two parties in October of this year.
However, financial analyst Daniel Ives predicts that this may be a protracted legal battle for Twitter, referring to the issue as a potentially disastrous scenario unless Musk is strong-armed to finalize the acquisition or made to pay a termination penalty amounting to $1 billion.