Social Media Platforms ... Sinking Profits

"For the big companies it's reasonable to assume that the rising tide that has been floating their boats for the past 5 years is just now a lot choppier."

"They clearly need to trim and to rationalize projects that they just haven't had to do for a decade-and-a-half because the environment was so munificent."

Jo-Ellen Pozner,  assistant professor of management, Santa Clara University, Leavey School of Business

The Twitter profile page belonging to Elon Musk is seen on an Apple iPhone mobile phone.

Nurphoto | Nurphoto | Getty Images

 

Alphabet, Amazon, Meta, Microsoft Corp. fell short of projections in recent earning, sending shares plunging, shaving hundreds of millions to billions from their market valuations. So far this year Meta (Facebook, Instagram) has lost over 72 percent of its value. Investors appear uncomfortable with chief executive Mark Zuekerberg's investments in an immersible digital world; the metaverse. Meta Platforms Inc is set to cut thousands of workers. 

Before that, it was Elon Musk's decision to cut Twitter Inc.'s staff in half after acquiring the network. Apple Inc. Amazon.com Inc. and Alphabet Inc. all have slowed or paused in their hiring. Elon Musk sold another batch of Tesla shares in a bid to help fund his Twitter buyout. He disposed of 19.5 million shares to the value of $3.95 billion. Tesla's chief executive, the single-largest shareholder, gave assurances he was finished offloading.

It was important, he said, to avoid an "emergency sale" should he need to close the Twitter acquisition as he struggled to bring in aditional equity partners, back in August. Tesla stock lost $60 billion in market capitalization, tumblding 56 percent this year, since peaking a year ago. Twitter is losing money, facing annual interest payments of close to $1.2 billion. Several major companies halted their ads on the platform since Musk took over as they wait to see how his leadership evolves.

"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", remarked Gene Munster of Loup Ventures, once the stock sales became public.

Meanwhile, his moves to cut costs -- including firing half the staff and asking afterward whether some he had fired would please come back -- and overhaul of the platform's operations resulted in several tumultuous weeks at Twitter. Some of the employees are not quite certain whether they remain employed, or whether they've been let go. Some Tesla shareholders worry that the CEO has spread himself too thin, leading to selling off more stock.

"It's hypothetically possible that he could use more of his Tesla stock to bail out Twitter, or turn to his cadre of co-investors, who would probably have no trouble finding the money." 

"The saying ,'if you owe the bank $100, that's your problem, but if you owe the bank $100 million, that's the bank's problem' might apply here,"

"[Investors and other lenders could take over the company if Twitter went through a bankruptcy proceeding, with Musk still serving as its chief executive.] Bankruptcy would also allow Musk to refinance the debt, which would make the company more financially stable." 

Andy Wu, assistant professor, Harvard business school

Twitter headquarters is shown in San Francisco on Nov. 4, 2022. Jeff Chiu/AP