The company’s financial position is getting worse.
Elon Musk tried to justify his decision to halve Twitter’s headcount shortly after buying the company as a need to cut costs and avoid bankruptcy. The company was losing $4 million a day, according to the new owner, and the deal increased Twitter’s debt obligations by $13 billion. At the same time, attempts to turn subscription into the company’s main source of income have not yet brought visible results, and many large advertisers continue to turn their backs on Twitter or wait some stabilization. So far, 90% of Twitter’s revenue has come from ads.
According to Bloomberg, all these events forced the S&P rating agency to downgrade Twitter’s credit rating to the level of B– by the beginning of November, by five notches at once, and this week the social network was deprived of it altogether.
Image Source: Reuters
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S&P just doesn’t have information about Twitter’s financial position at the moment, which makes it impossible to assign a specific rating to the company. This could make it difficult for Twitter to further raise borrowed funds, but Elon Musk has already admitted that he sold Tesla shares to cover the costs of the social network. It is the cost of the latter that makes it possible to consider him the richest man on the planet, so the new owner of Twitter retains some financial resources. It remains to be seen what this experiment with the purchase of a social network will eventually lead to, which is less and less reminiscent of the result of a pragmatic business calculation.