Since Elon Musk completed his acquisition of Twitter, now known as X, he has openly discussed the companyโs financial struggles. In recent months, it has become clear that X faces serious challenges in generating sufficient revenue, with Musk admitting that the situation is dire.
X’s financial troubles and plans
Earlier this month, Musk sent an email to X employees, which was reported by the Wall Street Journal. Musk acknowledged X’s influence on shaping national conversations and outcomes in the email. However, he also warned that the companyโs user growth is stagnating, revenue remains unimpressive, and the platform is โbarely breaking even.โ
This email comes amid reports that banks, which lent Musk US$13 billion to finance the deal, are preparing a coordinated move to sell off some of that debt. The main lenders โ Bank of America, Barclays, and Morgan Stanley โ have been reluctant to sell at a loss, especially given the economic challenges and Muskโs lengthy legal battle to finalise the purchase of Twitter.
The debt situation and banks’ next move
As the Wall Street Journal reports, some investors have significantly reduced the value of their stakes, with some estimates suggesting reductions of up to 78%. Meanwhile, the banks holding much of the debt hope to sell senior debt at a price close to 90-95 cents on the dollar, with a plan to retain the more junior holdings.
Although Musk has often referred to the platformโs potential, he now faces the reality of over US$1 billion in annual interest payments on the loans. This hefty cost, slower-than-expected user growth, and revenue have left X in a precarious financial position.
AI and new features: Muskโs evolving vision for X
Musk’s email mentioned X’s potential to become profitable within months. However, the company has not seen a breakthrough in its financial performance. Over the past year, Musk has worked to shift Xโs focus towards artificial intelligence, introducing new features like job listings and a video tab. Despite these additions, Musk’s grand vision of making X central to usersโ financial lives by the end of 2024 appears far off.
As X continues to test Musk’s AI ambitions, whether the company can overcome its financial hurdles and fulfil its promises remains to be seen. Muskโs remarks suggest a path forward, but the challenges are substantial, and only time will tell if X can turn things around.
