Elon MuskAttempt to end the acquisition of
Twitter a company
Complicating matters for Ned Segal, the social media company’s chief financial officer, who has been battling a drop in its share price as well as rising costs.
Mr. Musk said Friday that he plans to abandon a $44 billion deal struck in April in favor of Twitter because the company did not provide the information needed to assess the scale of fake accounts on its platform. Chairman Brett Taylor said Twitter was committed to closing the deal, adding that the company would pursue legal action to enforce the deal. Twitter on Monday posted a letter dated July 10 stating that Mr. Musk’s efforts to cancel the deal are disavowing his obligations under the merger agreement.
Justin Patterson, managing director of investment advisory services firm KeyBanc Capital Markets Inc.
The lawsuit between Twitter and Mr. Musk will increase pressure on the company’s stock price. Since the deal was reached in late April, Twitter shares have fallen about 35%, compared to a roughly 10% drop in the S&P 500, as social media companies struggle with a weak digital advertising market.
Twitter was the worst performer in the S&P 500 on Monday. Shares of the company closed at $32.65 Monday, nearly 40% less than the $54.20 share price that Musk agreed to pay.
The company said in April that total costs and expenses, at $1.33 billion, were up 35% during the quarter ended March 31 compared to the same period a year earlier. Analysts said advertising revenue increased 23% to $1.1 billion, but that it could take a hit if the economic environment deteriorates.
Mr. Segal, former
Goldman Sachs Group a company
The banker, who has been in charge of Twitter’s finances since 2017, recently benefited from lower financing costs and raising additional debt. The company said last week that it was laying off its jobs 30% of the talent acquisition team After it said in May it would pause hiring and look to cut costs. Twitter said the layoffs are expected to affect less than 100 people and are limited to the talent acquisition team.
Neil Bigley, senior vice president at Twitter, said Mr Musk’s attempt to walk away from the deal is not expected to negatively impact Twitter’s capital structure.
The deal was expected Possibly triple Twitter’s influence And add hundreds of millions of dollars in interest. Mr. Bigley added that the company would be “in a better position” if the deal were cancelled.
Twitter’s cash and cash equivalents fell to $2.30 billion during the first quarter of the year, from $4.25 billion in the same period a year earlier. Its short-term investment fell 12.7% during the quarter, to about $4 billion, down from $4.55 billion a year ago. Twitter’s total debt was about $6.62 billion at the end of the first quarter, up from $5.54 billion at the end of 2021, according to data provider S&P Global Market Intelligence.
Part of the debt is held in the form of convertible bonds and large banknotes, and Twitter has no maturities coming this year or next, according to S&P. Standard & Poor’s data showed that Twitter acquired about $2.43 billion in additional debt earlier this year, also in the form of convertible bonds.
Credit rating agency Standard & Poor’s said Thursday that Twitter’s BB+ rating, which is below investment grade, remains negative on credit watch and that potential litigation between the company and Mr. Musk is adding uncertainty around the deal.
Besides the hiring freeze, Twitter has seen number of exits by senior managers, including Bruce Falk, general manager of revenue, and Kayvon Beckbor, general manager of consumer business.
Mark Mahaney, senior managing director of the banking advisory firm, said the recent turmoil will likely hurt employee morale, which could dampen advertising revenue because employees may be less motivated to pursue new deals.
Evercore a company
“There’s all this uncertainty, which must be demoralizing. I’m sure it made it difficult for them to generate revenue, at a time when we would probably go into a recession in advertising.” I think for the CFO, that must be a nightmare .”
Mr. Musk and Mr. Seagal did not respond to a request for comment. Twitter declined to comment.
write to Jennifer Williams-Alvarez at [email protected]
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