Musk warns of Twitter bankruptcy as more senior executives quit

Nov 10 (Reuters) – Twitter Inc’s new owner Elon Musk on Thursday hinted at the possibility of the social network going bankrupt, citing a tumultuous day that included a warning from the US privacy regulator and the exit of the company’s trust and security chief.

The billionaire said in his first phone call with employees that he would not be able to cash out, Bloomberg News reported, two weeks after buying it for $44 billion — a deal that credit experts say left Twitter’s finances in dire straits.

Earlier in the day, in his first company email, Musk warned that Twitter would not be able to “survive the coming recession” if it failed to increase subscription revenue to offset advertising revenue, three people who saw the message said. Reuters.

Yoel Roth, who oversaw Twitter’s response to hate speech, misinformation and spam at the service, resigned on Thursday, two people familiar with the matter told Reuters.

In a tweet on Thursday, Roth described himself as the company’s “former Head of Trust and Security”.

Roth did not respond to requests for comment. Bloomberg and tech site Platformer first reported his exit.

Earlier on Thursday, Twitter’s Chief Information Security Officer Lea Kissner tweeted that she had resigned.

Chief Privacy Officer Damien Kieran and Chief Compliance Officer Marianne Fogarty have also resigned, according to an internal message posted on Twitter’s Slack messaging system on Thursday by a lawyer for their privacy team and seen by Reuters.

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Robin Wheeler, the CEO of an advertising company, told employees that he was staying at the company, a person who saw the message said, contradicting earlier media reports that he would be leaving as well.

“I’m still here,” Wheeler tweeted late Thursday.

The US Federal Trade Commission said it was watching Twitter with “grave concern” after three privacy and compliance officials resigned. This resignation could put Twitter at risk of violating regulatory orders.

Musk’s attorney Alex Spiro told other employees in an email Thursday that Twitter would continue to comply.

“We spoke with the FTC today about our ongoing obligations and are having an ongoing constructive conversation,” Spiro wrote.

He pointed out that only Twitter, not individual employees, could be held responsible for these orders.

“I understand there have been employees at Twitter who are not even working on the FTC issue commenting that they could (a) go to jail if we don’t comply – that doesn’t work,” he wrote.

In his first meeting with many employees at Twitter on Thursday afternoon, Musk warned that the company could lose billions of dollars next year, The Information reported.

Musk added in an email to employees that remote work will no longer be allowed and that they will be expected to be in the office at least 40 hours a week.

Twitter, Musk and Spiro did not respond to requests for comment about the possible bankruptcy, the FTC warning, or the departure.

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Musk moved into a clean house after taking over on October 27 and said the company was losing more than $4 million a day, mostly because advertisers started fleeing when he took over.

Twitter has $13 billion in debt after the deal and faces interest payments of up to $1.2 billion over the next 12 months. The payments surpass Twitter’s recently disclosed cash flow, which reached $1.1 billion at the end of June.

Musk has started charging $8 a month for the Twitter Blue service that will include blue check verification.

WARNING

“We are following the recent developments on Twitter with great concern,” Douglas Farrar, director of public affairs for the FTC, told Reuters.

“No CEO or company is above the law, and companies must follow our consent laws. Our revised consent order gives us new tools to ensure compliance, and we intend to use them,” Farrar said.

In May, Twitter agreed to pay $150 million to settle FTC allegations it misused private information, such as phone numbers, to target advertising to users after telling them the information was collected only for security reasons.

Twitter’s privacy lawyer on Thursday said in an internal memo that Spiro said Musk was willing to take a “big risk” with the company. “Elon puts rockets into space, he’s not afraid of the FTC,” the lawyer quotes Spiro as saying.

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The purchase of Twitter has sparked concern that Musk, who often wades into political debates, could face pressure from countries trying to regulate online speech.

It prompted US President Joe Biden that on Wednesday “Musk’s cooperation and/or technical relations with other countries should be looked into.”

VERIFIED ADVERTISERS

Musk told advertisers on Wednesday, speaking on Twitter’s Spaces feature, that he aims to turn the platform into a real force and stop fake accounts.

His assurances may not be enough.

Chipotle Mexican Grill ( CMG.N ) said on Thursday it was withdrawing its paid and owned content from Twitter “while we gain a better understanding of the direction of the platform under its new leadership.”

It has joined other brands including General Motors ( GM.N ) that have temporarily suspended advertising on Twitter since Musk took office, worried he would loosen content moderation rules.

Reporting by Katie Paul in Palo Alto, California and Paresh Dave in Oakland, California; Additional reporting by Jeffrey Dastin in Palo Alto, Diane Bartz in Washington, Yuvraj Malik in Bengaluru and Fanny Potkin and Hyunjoo Jin; Written by Sayantani Ghosh; Edited by Shounak Dasgupta, Bill Berkrot, Deepa Babington and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

Paresh Dave

Thomson Reuters

San Francisco Bay Area tech reporter covering Google and all of Alphabet Inc. Joined Reuters in 2017 after four years at the Los Angeles Times focusing on the local technology industry.

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