November 29, 2022

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Musk warns of Twitter bankruptcy as more CEOs resign

Musk warns of Twitter bankruptcy as more CEOs resign

(Reuters) – Twitter’s new owner Elon Musk on Thursday raised the possibility of the social media platform’s bankruptcy, capping a chaotic day that included a warning from the US privacy regulator and the exit of the company’s trust and safety leader.

In his first conference call with employees, the billionaire said he couldn’t 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 next economic downturn” if it failed to increase subscription revenue to offset declining advertising income, three people who viewed the message told Reuters.

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

In his Twitter profile on Thursday, Roth described himself as the “former head of trust and safety” at the company.

Ruth did not respond to requests for comment. Bloomberg and technology site Platformer reported its exit first.

Earlier on Thursday, Twitter’s chief information security officer Leah Kesner tweeted that she was resigning.

Chief Privacy Officer Damien Keran and Chief Compliance Officer Marianne Fogarty have also resigned, according to an internal message posted on Twitter’s Slack messaging platform on Thursday by a lawyer on its privacy team and seen by Reuters.

Robin Wheeler, the company’s chief advertising sales officer, told employees in a note that she was staying at the company, a person who saw the letter said, contrasting with previous media reports that she would also be leaving.

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“I’m still here,” Wheeler wrote on Twitter late Thursday.

The US Federal Trade Commission said it was watching Twitter with “deep concern” after the resignations of the three privacy and compliance officials. These resignations may put Twitter at risk of violating regulatory orders.

Musk’s attorney, Alex Spiro, told some employees in an email late Thursday that Twitter would remain compliant.

“We spoke to the Federal Trade Commission today about our ongoing commitments and we have an ongoing constructive dialogue,” Spiro wrote.

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

“I understand that there are Twitter employees who don’t even work on the FTC case commenting that they can (go) to jail if we don’t comply – that’s simply not the way this works,” he wrote.

The Twitter app on a smartphone is shown in this illustration taken, July 13, 2021. REUTERS/Dado Ruvic/Illustration // File Photo

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

Musk added in an email to workers that remote work will no longer be allowed and that they are expected to remain in the office for at least 40 hours a week.

Twitter, Musk and Spiro did not respond to requests for comment on a possible bankruptcy, FTC warning or departure.

Musk ruthlessly moved into a clean house after taking office on October 27, and said the company was losing more than $4 million a day, in large part because advertisers started fleeing as soon as he took over.

Twitter has $13 billion in debt after the deal and faces interest payments totaling nearly $1.2 billion in the next 12 months. The payments exceeded the cash flow recently revealed on Twitter, which reached $1.1 billion at the end of June.

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Musk has begun charging a fee of $8 per month for Twitter Blue that will include checking the blue check.

warning

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

“No CEO or company is above the law, and companies must follow our approval decisions. Our amended consent order gives us new tools to ensure compliance, and we are ready to use them,” Farrar said.

In May, Twitter agreed to pay $150 million to settle allegations by the Federal Trade Commission (FTC) that it misused private information, such as phone numbers, to target ads to users after telling them the information was collected for security reasons only.

Twitter’s privacy attorney said Thursday in the internal memo that Spiro said Musk was willing to take “a significant amount of risk” with the company. “Elon is putting rockets in space, he’s not afraid of the FTC,” the attorney quoted Spiro as saying.

The Twitter takeover has raised concerns that Musk, who often engages in political debates, could face pressure from countries trying to control online speech.

That prompted US President Joe Biden to say on Wednesday that Musk’s “collaboration and/or technical relations with other countries are worth considering.”

Advertisers that have not been reinstated

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

His assertions may not be enough.

Chipotle Mexican Grill (CMG.N) On Thursday, it said it was withdrawing its paid and owned content on Twitter “as we gain a better understanding of the platform’s direction under its new leadership.”

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Joined by other brands including General Motors (GM.N) Which has paused advertising on Twitter since Musk took over, fearing it would loosen content moderation rules.

Additional reporting by Katie Poole in Palo Alto, California and Parish Dave in Oakland, California; Additional reporting by Jeffrey Dustin in Palo Alto, Diane Bartz in Washington, Yuvraj Malik in Bengaluru, Fanny Botkin and Hyungu Jin; Writing Sayantani Ghosh. Editing by Shunak Dasgupta, Bill Berkrot, Deepa Babington, and Sam Holmes

Our criteria: Thomson Reuters Trust Principles.