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To Avoid Bankruptcy: Musk Suggests Twitter Turning Into A Bank

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To Avoid Bankruptcy: Musk Suggests Twitter Turning Into A Bank-GadgetAny
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Just two weeks into Elon Musk’s ownership of Twitter, confidence has reached what may be a record low. Musk warned Twitter’s staff in a call yesterday that the company may have to file for bankruptcy because it could lose billions more in the upcoming year.

The Verge published a whole transcript of Musk’s team meeting, where several employees sought advice from Musk on what their top objectives should be in order to assist Musk maintain Twitter while the economy is still in flux. Musk was succinct in his comments, stating that paying platform creators, enhancing Twitter search, and adding 1 billion new users to Twitter’s user base were his top priorities. In other words, he threatened to resign unless his remaining team members went “hardcore” to make Twitter “more compelling” so he could sell that product to users. One of his most radical and bold proposals, which he claims is “definitely happening,” is to modify Twitter so that it functions as a platform for electronic payments.

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“If you have a compelling product, people will buy it,” Musk told staff. “That has been my experience at SpaceX and Tesla.”

There are now more questions than answers about whether Twitter will survive Musk’s management style as a result of Musk’s stark honesty about a probable bankruptcy. Musk now has to deal with interest payments that will amount “near to $1.2 billion in the next 12 months,” according to Reuters, on top of the $13 billion debt he incurred when he purchased Twitter and the subsequent $4 million per day loss in ad revenue.

According to Reuters, the interest payments would exceed Twitter’s most recent stated cash flow of $1.1 billion in June. And Musk’s team appears to be fully aware of this risk; they feel under pressure to perform well and inquire about Musk’s strategy for dealing with the cash flow issue.

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“We just definitely need to bring in more cash than we spend,” Musk replied. “If we don’t do that and there’s a massive negative cash flow, then bankruptcy is not out of the question.”

Some people wonder if Musk is using the phrase to rile up employees who feel connected to the platform they built. After all, the idea of the richest man in the world declaring bankruptcy sounds almost as ridiculous as some of the best parody accounts currently troll users on Twitter. According to Bloomberg, Musk has previously used “the prospect of financial catastrophe” to inspire his staff. According to a person acquainted with Musk’s management style, “He’s attempting to convey the concept that if employees don’t work hard, Twitter will be left in a very bad place.”

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Of course, not only employees are impacted by the possibility of bankruptcy. According to Bloomberg, debt investors and credit raters were equally alarmed by Musk’s remarks and have been reaching out to asset managers and hedge funds to see if anyone is interested in purchasing part of Twitter’s debt at significantly reduced rates. Banks that helped finance Twitter through $6.5 billion in leveraged loans might face billions in losses, Bloomberg’s calculations show.

Musk continues to invest in Twitter while banks consider their options in light of the company’s dire financial situation. According to The New York Times, Musk sold $4 billion in Tesla stock to “save” Twitter.

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Monica Green

By Monica Green

I am specialised in latest tech and tech discoveries.

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