[Asia Economy Reporter Jeong Hyunjin] Social networking service (SNS) Twitter has started cost-cutting measures ahead of Elon Musk, Tesla CEO's final acquisition by freezing employment and laying off key executives. Since the announcement of the acquisition agreement, Twitter's stock price has fallen by more than 10%, and Musk is actively working to secure investors.
According to the Wall Street Journal (WSJ) and others on the 12th (local time), Parag Agrawal, Twitter CEO, stated in a memo sent to employees that "from this week, most hiring has been halted except for core business roles." He added that Twitter is currently cutting costs on business trips, consulting, marketing, and also reducing expenses related to real estate and infrastructure.
Agrawal CEO noted that global issues, including the Ukraine war and supply chain crisis, are damaging Twitter's business, and while large-scale layoffs are not planned, organizational changes to improve efficiency will take place.
He emphasized, "At the start of the pandemic in 2020, we decided to invest aggressively for growth, but we did not reach the intermediate milestones to achieve that goal. To responsibly manage our team, employment, and costs while strengthening our roadmap and work, we need to be deliberate."
Twitter also announced the dismissal of two executives in charge of the consumer products division and product revenue division. Kayvon Beykpour, head of the consumer products division, and Bruce Falk, head of the product revenue division, revealed that Agrawal CEO asked them to leave the company first. These individuals were appointed as division heads immediately after Agrawal became CEO in November last year.
Agrawal CEO's announcement came as Musk accelerates the Twitter acquisition process. Musk is focusing on securing $44 billion (approximately 56.8 trillion KRW) in acquisition funds. Of this, $12.5 billion was borrowed using Tesla shares as collateral, and to minimize this, he is seeking investors. Bloomberg reported that Musk is negotiating investments offering up to $6 billion worth of Twitter preferred shares.
On the 5th, Musk announced that he had secured $7.14 billion in acquisition funds from 19 investors, including Saudi Arabia's Prince Alwaleed bin Talal. This funding partially covered the Tesla stock collateral loan. Bloomberg stated, "Since then, Musk has received additional equity investment commitments of $1 billion, which reduces the Tesla stock collateral loan and lowers risks for Musk and lending banks." Bloomberg also expects this to ease pressure on Tesla shares.
Despite these moves by Twitter and Musk, the market does not rule out the possibility that the final acquisition may not occur. Since the acquisition announcement, Twitter's stock price has dropped significantly, causing Twitter's market capitalization to fall $9 billion below Musk's acquisition price of $44 billion. Twitter's stock closed at $45.08 on the day, nearly $10 below Musk's acquisition price of $54.20. If Musk abandons the acquisition, he must pay a $1 billion penalty.
Mark Mahoney, an analyst at Evercore ISI, analyzed, "The market's confidence in the deal being completed is slightly declining due to regulatory hurdles." Dan Ives, an analyst at Wedbush Securities, said the likelihood of the acquisition deal succeeding is over 90%, but noted that the decline in Twitter's stock price, regulatory issues, and uncertainty over Musk's acquisition funding are putting pressure on the stock price.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
