Elon Musk reportedly told potential investors in his pending Twitter buyout that he plans to jettison nearly 75% of the company’s 7,500 workers.
The Washington Post reported that even if the deal doesn’t go through by the end of next week as expected, the social media company’s workforce is “likely to be hit with massive cuts in the coming months.”
The cutbacks will have a major impact on Twitter’s ability to control harmful content and prevent data breaches, the report said.
Advisers to both Twitter and Musk are working to get the $44 billion deal closed by the Oct. 28 deadline imposed by the court, according to Bloomberg.
But should the deal collapse, the Post reported that big cuts are expected anyway. Twitter’s current management plans to slash the company’s payroll by about $800 million by the end of next year, which the story estimated would impact nearly a quarter of the workforce, citing corporate documents and sources familiar with the company’s deliberations.
“The company also planned to make major cuts to its infrastructure, including data centers that keep the site functioning for more than 200 million users that log on each day,” the Post reported.
The magnitude of the cutbacks suggest Twitter will have difficulty combating misinformation, hate speech and spam in their wake. A former Twitter executive who oversaw spam and health metrics, Edwin Chen, who is now CEO of content moderation startup Surge AI, told the Post that while he believed Twitter was overstaffed, “the cuts Musk proposed were ‘unimaginable’ and would put Twitter’s users at risk of hacks and exposure to offensive material such as child pornography.”
“It would be a cascading effect,” Chen said, “where you’d have services going down and the people remaining not having the institutional knowledge to get them back up, and being completely demoralized and wanting to leave themselves.”
After the Post initially published its story online, Twitter’s top lawyer Sean Edgett sent out a note to all employees saying the company did not have any confirmation from Musk about his plans, the report said. Twitter’s own “cost savings discussions” were put on hold once the sale of the company was arranged, the email said.
Morgan Stanley is leading Wall Street banks involved in the deal as they help Musk to secure about $13 billion in debt financing, Bloomberg reported. Musk made a statement earlier this month that his closing the deal depended on getting that financial support.
He has also said that he won’t close without resolving his lawsuit over his claims that Twitter executives were misleading about the number of bots, or automated accounts, on the service, Bloomberg reported.
Musk said Wednesday on a Tesla Inc. earnings call that he was “excited about the Twitter situation.” He described the social media company as an asset with “incredible potential” that has “sort of languished for a long time.” He also said that, at $54.20 a share, he was obviously overpaying for it.
Wall Street analyst Dan Ives agreed, calling the $44 billion price tag “simply a train wreck,” in a note to his clients at Wedbush securities Friday, stating that he sees the company valued at about $30 billion.
Twitter is “long overdue for expense reductions” given that it’s not growing quickly, Ives wrote. “However, Musk cannot cut his way to growth with Twitter and a number in the 75% zip code would be way too aggressive in our opinion out of the gates and potentially set back this core platform for years before the “X App” strategy takes hold.”
Musk may sell $5 billion in Tesla shares in the next week to fund the acquisition, Benzinga reported Friday. Should the financing get problematic, Ives said he may sell up to $10 billion in Tesla stock, which he said would be a “brutal situation” for investors in the electric vehicle manufacturer.
