NOVEMBER 11, 2022
- Elon Musk brought up bankruptcy as a possibility in a meeting with Twitter staff, people present said.
- The billionaire had just warned in an early morning email the “economic picture ahead is dire.”
Elon Musk said in his first meeting with Twitter staff since buying the company that “bankruptcy isn’t out of the question,” sources who attended the event told Insider.
The billionaire on Thursday gathered employees for an impromptu all-hands meeting at Twitter’s San Francisco headquarters, giving workers about an hour’s notice. It took place after Musk earlier that morning sent Twitter staff an email, his first company-wide communication since he took over almost two weeks ago. In that note, he ended remote work and warned employees that the “economic picture ahead is dire.”
Most of the questions during the meeting related to his email and the recent string of resignations of company leaders in the wake of last week’s mass layoff, including those heading up internal systems security, privacy and compliance. Yoel Roth, Twitter’s head of trust and safety, departed on Thursday.
One employee asked why Musk ended working from home, and the billionaire looked “visibly annoyed,” and “just shut her down” saying that’s the way the company will operate going forward, according to a person at the meeting.
Another employee asked Musk how he plans to deal with attrition at Twitter.
“I don’t know how to answer that, but I can tell you it’s about being hardcore,” Musk said, according to a person who witnessed the meeting. “A small amount of exceptional people who are highly motivated can do better than a smaller group of high achievers with moderate motivations. If you can’t perform hardcore, then Twitter is not for you.”
Musk floated the idea of bankruptcy after being asked by another employee what would happen if his plans to grow company revenue, right now based largely on building out a subscription business, didn’t pan out. One person who witnessed the meeting said people “weren’t expecting that.”
Bankruptcy is typically seen as a last ditch effort by companies, but it could be beneficial to Twitter since Musk loaded it with debt to fund his $44 billion leveraged buyout. Twitter now has more than $10 billion in debt. The interest payments on that may be so high that the company may struggle to meet those obligations, especially if advertisers are pulling back during a weak economy. Even before the deal, Twitter struggled to make a profit.
A bankruptcy would give Musk the chance to cut that debt load, and lower interest payments. The punishment for such a move would be that Twitter’s lenders and bondholder would likely take a large stake in the company, in return for giving up their right to be paid the interest and principal they are owed. The result would, in theory, mean that Musk and other investors in his deal would own a lot less of Twitter, but he could still maintain control.
The CEO hasn’t shied away from the idea of bankruptcy in the past. In June, Musk said he was worried about keeping Tesla out of bankruptcy amid supply-chain issues.
