Elon Musk, CEO of Tesla and SpaceX, who is also the CTO and executive chairman of Twitter, recently commented on the negative cash flow at Twitter.
He stated that the company is facing a significant drop in advertising revenue, combined with heavy debt, which is causing negative cash flow. Musk emphasized the importance of reaching positive cash flow before pursuing other initiatives.
Musk acquired Twitter in October of the previous year in a deal worth approximately $44 billion, including $13 billion in debt. To finance the acquisition, he sold a substantial amount of his Tesla shares.
However, in response to Musk’s cost-cutting measures and changes to the platform (such as lenience in permitting hate speech), many advertisers reduced or halted their ad spending on Twitter, leading to a decline in revenue.
But, Musk claimed in April that almost all advertisers had resumed buying ads and that the company was close to breaking even, with expectations of becoming cash flow positive in the following quarter.
In the past month, Linda Yaccarino, formerly in charge of global advertising at NBCUniversal, assumed the role of Twitter CEO. Yaccarino’s appointment raised hopes within the media industry that Twitter would address the immediate challenges faced by its ad business.
We’re still negative cash flow, due to ~50% drop in advertising revenue plus heavy debt load. Need to reach positive cash flow before we have the luxury of anything else.
— Elon Musk (@elonmusk) July 15, 2023
Recently, Twitter introduced a revenue-sharing program for select content creators on its platform. Musk’s remarks were in response to users who expressed disappointment over the limited scope of the program. The program was initially available only to users who subscribed to Twitter Blue verified accounts, and the payments were driven by ads placed in replies to tweets.
Various influencers, including controversial figures and supporters of Tesla, have mentioned receiving payments from Twitter through this program. However, the total amount paid to creators in the first round of payments is unknown. Twitter declined to provide further information, and its parent company, X Corp., is currently facing lawsuits related to non-payment of bills and severance by former employees and vendors.