Twitter posts $270 million loss in first earnings report since Elon Musk ‘terminated’ $44 billion buyout deal

Social media giant Twitter posted a bigger-than-expected loss on Friday morning in its first earnings report since billionaire Elon Musk backed out of a deal to buy the company, in part due to heightened uncertainty. surrounds the fate of the company as it engages in a potentially protracted legal battle with the richest person in the world.

Main facts

  • San Francisco-headquartered Twitter reported second-quarter revenue of $1.2 billion, lower than analysts’ average estimate of $1.3 billion, and a decrease of 1% compared to the same period last year.
  • The company also announced a bigger-than-expected loss of $270 million, or 35 cents per share, compared to forecasts for a loss of 7 cents per share and profit of $66 million in the second quarter of the year. last year.
  • In its earnings release, Twitter blamed its disappointing performance on ad industry headwinds coupled with broader economic concerns and uncertainty surrounding Elon Musk’s deal to buy Twitter and take it private.
  • The company says it will not hold an earnings conference call, issue a letter to shareholders, or release financial projections as the deal is still pending.
  • Twitter also disclosed that it spent about $33 million related to the acquisition during the second quarter and $19 million in costs associated with layoffs, some of which affected about a third of the company’s hiring team.
  • Twitter shares fell 2% to around $38.50 within minutes of the announcement; stocks have plunged more than 40% in the past year, while the S&P 500 has fallen about 16%.

The context

Twitter stock has been buzzing since Elon Musk acquired a 9% stake in the company in April, announced a takeover bid at a massive premium a few weeks later, and then decided to “terminate” the operation at the beginning of the month. The shares soared as much as 60% as the deal gained popularity, but soon began to tumble when Elon Musk raised concerns about fake accounts and spam on the platform. Although Twitter’s board had already approved the takeover, Elon Musk pulled out on July 8, sending shares down nearly 40% from their April highs.

What to watch out for

On July 12, Twitter’s board sued Elon Musk for pulling out of the deal, asking a Delaware judge to order the billionaire to move forward with the deal. . The trial is scheduled for October, according to Twitter on Friday. In a note to clients, Daniel Ives, an analyst at Wedbush, called Elon Musk’s decision “a nightmare scenario for Twitter,” predicting a lengthy legal battle for Twitter to either force through the deal or make Elon Musk pay a $1 billion termination penalty.

Important figure

$30 billion. That’s Twitter’s stock market value on Friday, about 22% below Elon Musk’s takeover bid.

Article translated from Forbes US – Author: Jonathan Ponciano

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