'Black Monday' Fear... Twitter Layoff Storm After Musk's Acquisition

[Asia Economy Reporter Yujin Cho] Elon Musk, CEO of Tesla who acquired Twitter, has launched a high-intensity restructuring. As it was revealed over the past weekend that a draft for large-scale layoffs was being prepared, a tense atmosphere is spreading among employees facing the threat of dismissal. With speculation that Musk may carry out layoffs before bonus payments, fear of a 'Black Monday' is spreading.

On the 30th (local time), major foreign media including The Wall Street Journal (WSJ) reported that Twitter is planning layoffs across all job categories, including engineering and marketing.

Regarding the expected scale of layoffs, the U.S. political media Axios reported that up to 30% of the total 7,500 employees could be cut by department, and there were also reports that up to 75% could be laid off.

Ross Gerber, CEO of Gerber Kawasaki Asset Management who financed Musk during the Twitter acquisition, told The New York Times (NYT) that he heard from Musk’s personnel that up to about 50% layoffs would be carried out.

In response, an NYT source said that internally at Twitter, it is believed that the company cannot operate normally with only the remaining 50% of employees, and that 10-15% of the remaining staff will leave the company voluntarily due to overwork and other reasons.

Axios reported that among Twitter employees, there is a mixed atmosphere of fatigue, anger, and helplessness. One source said that managers in each department were asked to prepare lists of employees to be laid off and those to remain, and that even employees who survive the layoff threat are uncertain whether their jobs will be maintained.

Musk has already removed many anti-Musk C-level executives, including Twitter CEO Parag Agrawal and CFO Ned Segal, but has not announced their successors.

With speculation that the layoff announcement could come next Monday, fear of a 'Black Monday' is growing. Internally, there are concerns that layoffs will be conducted before November 1, when stock purchase rights will be granted to some executives and employees as a bonus for this acquisition, WSJ reported.

One source said, "Layoffs are expected to be carried out across all departments including engineering and marketing," adding, "Employees are preparing for 'Black Monday.'"

According to documents submitted to the Securities and Exchange Commission (SEC) in July, Twitter began cost-cutting earlier this year in response to changes in the macroeconomic environment, and as part of this, significantly reduced employment in the second quarter. This decision was due to a decline in digital advertising demand caused by soaring inflation, deepening recession forecasts, and uncertainties related to the Ukraine war, which worsened the social media market conditions.

According to market information firm FactSet, Twitter recorded annual losses in 8 out of the last 10 years.

In fact, the acquisition process brought in large-scale debt, sharply increasing interest expenses. Experts pointed out that with Musk’s acquisition increasing Twitter’s debt by $13 billion, the company will face pressure to reduce costs and increase revenue as interest expenses rise by more than $1 billion annually.

According to internal Twitter documents, annual interest expenses, which were $51 million last year, are estimated to surge to over $1 billion after Musk’s acquisition.