Elon Musk’s bid to stop Twitter deal puts pressure on CFO

Elon MuskAn attempt to stop the takeover of

Twitter Inc.

That’s problematic for Ned Segal, the social media company’s chief financial officer, who is facing a slump in his stock price and higher costs.

Mr. Musk told Twitter on Friday that he planned to drop the $44 billion deal in April because the company did not provide the information needed to assess the level of fake accounts on its platform. While Twitter is committed to completing the transaction, board chairman Brett Taylor said the company would pursue legal action to enforce the deal. Twitter issued a letter on Monday, dated July 10, asking Mr. Musk’s attempt was to renege on his obligations under the merger agreement.

“The longer this court battle goes on, the more pressure there is to cut costs, protect cash and fund the business,” said Justin Patterson, managing director of investment advisory services firm KeyBanc Capital Markets Inc.

A lawsuit between Twitter and Mr. Musk could put more pressure on the company’s share price. Since the deal was reached in late April, Twitter shares have fallen about 35%, compared with a roughly 10% drop in the S&P 500, as social media companies soften the digital ad market.

Twitter The S&P 500 was the worst performer on Monday. Shares of the company closed at $32.65 on Monday, Mr. That was nearly 40% less than the $54.20-a-share price Musk had agreed to pay.

The company said in April that total costs and expenses for the quarter ended March 31 rose 35% from the same period a year earlier to $1.33 billion. Advertising revenue rose 23% to $1.1 billion, but analysts said it would suffer if the economic environment worsened.

Ned Segal, Chief Financial Officer of Twitter Inc.


Photo:

David Paul Morris/Bloomberg News

Mr. Segal, Ex

Goldman Sachs Group Inc.

The banker, who has been in charge of Twitter’s finances since 2017, recently took advantage of lower financing costs to raise additional debt. The company announced the layoffs last week 30% of its talent acquisition team After May said it would suspend hiring and cut costs. The layoffs are expected to affect fewer than 100 people and are limited to the talent acquisition team, Twitter said.

Mr. walking away from the contract. Musk’s move is not expected to negatively impact Twitter’s capital structure, senior vice president Neil Beckley said.

Moody’s Corp

A rating agency.

A deal was expected Triple your Twitter influence And add hundreds of millions of dollars in interest. The company would be “in a better position” if the deal was cancelled, Mr. Beckley added.

Twitter’s cash and cash equivalents fell to $2.30 billion in the first quarter of the year, from $4.25 billion in the same period a year earlier. Its short-term investments fell 12.7% in the quarter to $4 billion from $4.55 billion a year ago. According to data provider S&P Global Market Intelligence, Twitter had about $6.62 billion in total debt at the end of the first quarter, up from $5.54 billion at the end of 2021.

Part of the debt is in the form of convertible bonds and senior notes, and Twitter has no maturities this year or next, S&P said. Twitter took on $2.43 billion in additional debt earlier this year, in the form of convertible bonds, S&P data show.

S&P Global Ratings on Thursday downgraded Twitter’s BB+ rating, below investment grade, with a credit watch of negative, and said the company and Mr. It also said potential litigation between Musk adds to the uncertainty surrounding the transaction.

With its hiring freeze, Twitter looked Multiple exits by top executives including Bruce Falk, general manager of revenue, and Kevin Baigpour, general manager of its consumer business.

The latest upheaval will hit employee morale, which could reduce advertising revenue, as staff will be less motivated to pursue new contracts, said Mark Mahaney, senior managing director at the banking consultancy.

Evercore Inc.

“There’s this uncertainty, and it’s going to dampen morale. I’m sure as we go into an ad recession, it’s going to be harder for them to generate revenue,” he said. “I think it’s got to be a nightmare for the CFO. “

For comment, Mr. Musk and Mr. Segal did not respond. Twitter declined to comment.

Write to Jennifer Williams-Alvarez at [email protected]

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