Twitter only made profit of $1bn in 2018 and 2019; not way to make cash – Musk

SINCE going public in 2013, Twitter has only occasionally turned a profit, even if it has a commanding role in politics and culture worldwide.

The company’s announcement this week that it had reached a deal for Tesla boss Elon Musk to buy it outright raises the question of whether this will lead to a brighter financial future for Twitter? Musk has downplayed economic considerations as a motivation for his purchase, saying earlier this month: “This is not a way to make money. It’s just that my strong, intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilisation.”

Listed on the New York Stock Exchange for just under nine years, Twitter has posted a net loss every year, except 2018 and 2019 when it made a profit of just over $1 billion. Musk is paying above $44bn for the company, an amount dwarfed by Facebook’s valuation of more than $500bn.

Twitter’s revenues are mainly derived from advertising rather than its user base, which isn’t large enough to make up its finances. At the end of last year, it claimed 217 million “monetisable” users, who are exposed to advertising on the platform. That’s far from the 1.93 billion Facebook subscribers.

Twitter is set to release its first quarter results today. Wall Street expects earnings per share of three cents and revenues of $1.2bn. Even if Twitter’s business prospects may not be his top concern, the world’s richest man will be looking to at least not lose money, especially since part of the acquisition could be financed by his own funds.

In a securities filing released last week, Musk pointed to a $13bn debt facility from a financing consortium led by Morgan Stanley, a separate $12.5bn margin loan from the same bank, as well as $21bn from his personal fortune as being behind the deal.

Another option in Musk’s hands would be to cut the workforce, which may align with his desire to lighten content moderation on the platform.

Musk could also be looking to accelerate user growth and thus advertising revenue, or add new paid features to the platform.

By financing a significant portion of the acquisition with bank loans, Musk will increase Twitter’s debt load.