Musk warns of Twitter bankruptcy as more senior executives quit


Nov 10 (Reuters) – Twitter Inc’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 an outing from the company’s trust and security leader.

Bloomberg News reported that the billionaire said he could not rule out bankruptcy in his first public call with employees, two weeks after buying it for $44 billion – a deal that credit experts say will put Twitter’s finances in dire straits.

Earlier in the day, in his first company-wide email, Musk warned that Twitter “will not be able to survive the coming economic downturn” unless it can increase subscription revenue to offset declining advertising revenue, three people who saw the message told Reuters.

Yoel Roth, who oversaw Twitter’s response to combating hate speech, misinformation and spam on the service, resigned on Thursday, two people familiar with the matter told Reuters.

In a Twitter profile Thursday, Roth described himself as the “former head of Trust and Security” at the company.

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

On Thursday, Twitter’s Chief Information Security Officer Leah Kissner announced her resignation in a tweet.

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

Robin Wheeler, the company’s top advertising sales executive, told employees in a memo that he was staying with the company, a person who saw the message said, contradicting earlier media reports that he too would be leaving.

“I’m still here,” Wheeler tweeted late Thursday.

The US Federal Trade Commission said it was following Twitter with “deep concern” after three privacy and compliance officers quit. The resignations put Twitter at risk of violating regulatory orders.

Musk’s lawyer, Alex Spiro, said in an email to some employees on Thursday that Twitter would remain in compliance.

“We spoke with the FTC today about our ongoing obligations and have a constructive ongoing dialogue,” Spiro wrote.

He said only Twitter could be held responsible for the orders, not individual employees.

“I understand that there are employees at Twitter who are not involved with the FTC matter that (could) be arrested if we didn’t comply – that’s just not the case,” he said.

The Twitter app is seen on a smartphone in this July 13, 2021, file photo. REUTERS/Dado Ruvic/Illustration//File Photo

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

In an email, Musk added to employees that telecommuting will no longer be allowed and that at least 40 hours per week will be expected to be in the office.

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

After taking over on Oct. 27, Musk moved to a ruthlessly clean house, saying the company was losing more than $4 million a day, largely because advertisers fled after he took over.

Twitter has $13 billion in debt after the deal and expects to pay a total of about $1.2 billion in interest payments over the next 12 months. The payments are more than Twitter’s most recently disclosed cash flow of $1.1 billion at the end of June.

Musk started paying $8 a month for the Twitter Blue service, which includes blue check verification.

WARNING

“We are following the recent developments on Twitter with deep concern,” Douglas Farrar, director of public affairs for the FTC, told Reuters.

“No CEO or company is above the law, and companies must comply with our consent decrees. Our revised consent decree gives us new tools to ensure compliance, and we’re ready to use them,” Farrar said.

In May, Twitter agreed to pay $150 million to settle allegations that the FTC misused personal information such as phone numbers.

On Thursday, Twitter’s privacy attorney noted in an internal memo that Spiro said Musk was willing to “take a big risk” with the company. “Elon puts rockets into space, he’s not afraid of the FTC,” the attorney quoted Spiro as saying.

The purchase of Twitter has raised concerns that Musk, who often wades into political debates, could face pressure from countries seeking to control online speech.

This prompted US President Joe Biden to say on Wednesday that Musk “deserves to be considered for cooperation and/or technical relations with other countries”.

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Musk told advertisers speaking at Twitter’s Spaces feature on Wednesday that he aims to make the platform a force for truth and stop fake accounts.

Its guarantees may not be sufficient.

Chipotle Mexican Grill ( CMG.N ) said on Thursday it was pulling back paid and owned content on Twitter, “as we better understand the direction of the platform under its new leadership.”

Musk has joined other brands, including General Motors ( GM.N ), which suspended advertising on Twitter after taking office, worried it would loosen content moderation rules.

Reporting by Katie Paul in Palo Alto, Calif. and Paresh Dave in Oakland, Calif.; Additional reporting by Jeffrey Dustin in Palo Alto, Diane Bartz in Washington, Yuvraj Malik and Fanny Potkin in Bengaluru, and Hyunjoo Jin; Written by Sayantani Ghosh; Editing by Shounak Dasgupta, Bill Berkrot, Deepa Babington, and Sam Holmes

Our standards: Thomson Reuters Trust Principles.

Paresh Dave

Thomson Reuters

Tech reporter based in the San Francisco Bay Area covering Google and the rest of Alphabet Inc. He joined Reuters in 2017 after focusing on the local technology industry at the Los Angeles Times.



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