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Musk warns of Twitter bankruptcy as more senior executives quit

Published 11/10/2022, 10:27 AM
Updated 11/11/2022, 11:11 AM
© Reuters. FILE PHOTO: Twitter app is seen on a smartphone in this illustration taken, July 13, 2021. REUTERS/Dado Ruvic/Illustration//File Photo
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(This Nov. 10 story has been refiled to correct pronoun from she to they in paragraph 7)

By Katie Paul and Paresh Dave

(Reuters) - Twitter Inc (NYSE:TWTR)'s new owner Elon Musk on Thursday raised the possibility of the social media platform going bankrupt, capping a chaotic day that included a warning from a U.S. privacy regulator and the exit of the company's trust and safety leader.

The billionaire on his first mass call with employees said that he could not rule out bankruptcy, Bloomberg News reported, two weeks after buying it for $44 billion - a deal that credit experts say has left Twitter's finances in a precarious position.

Earlier in the day, in his first company-wide email, Musk warned that Twitter would not be able to "survive the upcoming economic downturn" if it fails to boost subscription revenue to offset falling advertising income, three people who have seen the message told Reuters.

Yoel Roth, who has overseen Twitter's response to combat hate speech, misinformation and spam on the service, resigned on Thursday, two people familiar with the matter told Reuters.

In his Twitter profile on Thursday, Roth described himself as "Former Head of Trust & Safety" at the company.

Roth did not respond to requests for comment. Bloomberg and tech site Platformer reported his exit first.

Earlier on Thursday, Twitter's Chief Information Security Officer Lea Kissner tweeted that she had quit.

Chief Privacy Officer Damien Kieran and Chief Compliance Officer Marianne Fogarty also resigned, according to an internal message posted to Twitter's Slack messaging system on Thursday by an attorney on its privacy team and seen by Reuters.

Robin Wheeler, the company's top ad sales executive, told employees in a memo that she was staying at the company, a person who had seen the message said, diverging from earlier media reports that she too would be leaving.

"I'm still here," Wheeler tweeted late on Thursday.

The U.S. Federal Trade Commission said it was watching Twitter with "deep concern" after the three privacy and compliance officers quit. These resignations potentially put Twitter at risk of violating regulatory orders.

Musk attorney Alex Spiro told some employees in an email late on Thursday that Twitter would remain in compliance.

"We spoke to the FTC today about our continuing obligations and have a constructive ongoing dialogue," Spiro wrote.

He stated that only Twitter, not individual employees, could be held liable against the orders.

"I understand that there have been employees at Twitter who do not even work on the FTC matter commenting that they could (go) to jail if we were not in compliance - that is simply not how this works," he wrote.

In his first meeting with many employees at Twitter on Thursday afternoon, Musk warned that the company may lose billions of dollars next year, the Information reported.

Musk added in the email to workers that remote work would no longer be allowed and that they would be expected in the office for at least 40 hours per week.

Twitter, Musk and Spiro did not respond to requests for comment on a potential bankruptcy, the FTC warning, or the departures.

Musk ruthlessly moved to clean house after taking over on Oct. 27 and has said the company was losing more than $4 million a day, largely because advertisers started fleeing once he took over.

Twitter has $13 billion in debt after the deal and faces interest payments totaling close to $1.2 billion in the next 12 months. The payments exceed Twitter's most recently disclosed cash flow, which amounted to $1.1 billion as of the end of June.

Musk has begun charging $8 a month for the Twitter Blue service that will include a blue check verification.

WARNING

"We are tracking recent developments at Twitter with deep concern," Douglas Farrar, the FTC's director of public affairs, told Reuters.

"No CEO or company is above the law, and companies must follow our consent decrees. Our revised consent order gives us new tools to ensure compliance, and we are prepared to use them," Farrar said.

In May, Twitter agreed to pay $150 million to settle allegations by the FTC it misused private information, like phone numbers, to target advertising to users after telling them the information was collected only for security reasons.

Twitter's privacy attorney on Thursday mentioned in the internal memo that Spiro had said that Musk was willing to take a "huge amount of risk" with the company. "Elon puts rockets into space, he's not afraid of the FTC," the attorney quoted Spiro as saying.

Twitter's buyout has sparked concerns that Musk, who has often waded into political debates, could face pressure from countries trying to control online speech.

It prompted U.S. President Joe Biden to say on Wednesday that Musk's "cooperation and/or technical relationships with other countries is worthy of being looked at."

ADVERTISERS NOT REASSURED

Musk told advertisers on Wednesday, speaking on Twitter's Spaces feature, that he aimed to turn the platform into a force for truth and stop fake accounts.

His assurances may not be enough.

© Reuters. FILE PHOTO: Twitter app is seen on a smartphone in this illustration taken, July 13, 2021. REUTERS/Dado Ruvic/Illustration//File Photo

Chipotle Mexican Grill (NYSE:CMG) said on Thursday it had pulled back its paid and owned content on Twitter "while we gain a better understanding on the direction of the platform under its new leadership."

It joined other brands including General Motors (NYSE:GM) that have paused advertising on Twitter since Musk took over, concerned that he will loosen content moderation rules.

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