Twitter recently reported losses of $0.08 per share in its second quarter earnings, falling below the $0.14 gain per share expected by analysts. The rough quarter was attributable to “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk,” the company said in a press release.
Twitter CFO Ned Segal therefore told employees in an email that the challenges would likely impact annual bonus checks, while two employees told The New York Times that the current bonus pool is 50% of what the company would have maintained under more robust business conditions.
Earlier this year, Twitter joined other technology companies in attempting to cut costs by pausing hiring and reducing office space on multiple continents. The company’s stock price has fallen from $64.14 one year ago to $40.67, marking a nearly 37% decline.
Beyond an economy troubled by inflationary pressures, supply chain bottlenecks, and other persistent issues, Twitter is currently battling Musk in court over his attempt to nix a previous offer to buy the company for $44 billion. Musk claims that the true number of fake accounts on the platform could number as high as 33% rather than the company’s reported 5%, with a lower number of monetizable daily active users (mDAU) potentially justifying a lower valuation. A trial to determine the status of the acquisition deal is scheduled for October.
“Mr. Musk and his financial advisors at Morgan Stanley have been requesting critical information from Twitter as far back as May 9, 2022 — and repeatedly since then — on the relationship between Twitter’s disclosed mDAU figures and the prevalence of false or spam accounts on the platform,” attorneys for Musk wrote last month. “Notwithstanding these repeated requests over the past two months, Twitter has still failed to provide much of the data and information responsive to Mr. Musk’s repeated requests.”
On Tuesday, CNN and The Washington Post obtained a whistleblower report filed by former Twitter cybersecurity czar Peiter “Mudge” Zatko, who claimed that company leadership misled board members and government regulators about potential vulnerabilities that left the platform open to hacking and foreign manipulation. He also alleged that Twitter officials do not have the resources or motivation to determine the true number of fake accounts on the platform — a claim that appears to support Musk’s case.
“We have already issued a subpoena for Mr. Zatko, and we found his exit and that of other key employees curious in light of what we have been finding,” Alex Spiro, an attorney for Musk, told CNN.
Twitter’s lawsuit against the world’s richest man nevertheless asserts that he is obligated to complete the deal. “Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” the lawsuit said. “Musk apparently believes that he… is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.”