Twitter Heading Into Bankruptcy? Elon Musk Issues Dire Warning Over Cash Flow Crisis

Elon Musk has raised the specter of bankruptcy at Twitter a fortnight after completing the controversial takeover of the microblogging platform and firing top executives including the CEO.

According to Yahoo Finance, the mercurial tech billionaire has said he won't rule out Twitter filing for bankruptcy in the next year. He was speaking to employees in an emergency all-hands meeting on Thursday.

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Musk made the offhand comment when he was talking about the company's cash flow and fielding questions from the employees. He said Twitter may end up with 'net negative cash flow of several billion dollars' next year. He added that bankruptcy is 'not out of the question' unless the social media giant brings in more cash than it spends.

More Tightening

Separately, Musk tightened his stance on work from home, saying that unless employees are prepared to spend 40 hours a week at the office, they would rather have to consider quitting. Musk last week might as well file their resignation letters.

Musk has already laid off some 3,700 Twitter employees, who constitute half of its workforce. Justifying the mass layoffs, Musk said that the company was witnessing "massive drop in revenue" as advertisers started withdrawing ads. Musk directly blamed a coalition of civil rights groups was responsible as they pressurized top advertisers to withdraw ad deals. Musk said the activists are cutting at the root of Twitter revenue in order to force their view on content moderation on Twitter.

In another measure intended to shore up revenue, Musk proposed charging $8 per month for the verification badge for Twitter users.

Elon Musk
Elon Musk Twitter

Musk then sold Tesla stock worth about $4 billion this week, apparently in a bid to shore up finances. The Tesla Chief Executive Officer sold some 19.5 million shares of the electric vehicle company, according to regulatory filings in New York.

Analysts said Musk's decision to sell more Tesla shares means that he is gearing up to face a tough time running Twitter. "It looks like Musk is preparing for things to stay bad at Twitter for the next year ... He's preparing for Twitter to be a money hole," Gene Munster of Loup Ventures said, according to Bloomberg.

Poor Finances at Twitter

The report adds that Musk immediately faces as much as $1.2 billion in annual interest payments alone at Twitter. Twitter's revenue has come under strain after several advertisers pulled ads from the platform following Musk's takeover. In the aftermath, Twitter is rolling out an extensive job trimming and other cost-saving moves.

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