Twitter’s Negative Cash Flow Unleash Musk’s Aggressive Business Action

Elon Musk took over Twitter last year in a $44 billion deal. Musk attributed the microblogging platform as non-profitable when he stepped in. Since then, the chief has been in talks about managing the platform extensively to generate business and revenue. However, reports suggest that none of his strategies have been successful. After much debate and delay regarding Twitter's profits, Musk's recent tweet has unveiled that the platform is spending more than it earns.

Elon Musk tweeted, "We're still experiencing negative cash flow due to a ~50% drop in advertising revenue and a heavy debt load. We need to achieve positive cash flow before we can consider anything else."

While the concept of cash flow is not new in any business, it is usually an indicator of aggressive expansion for companies. However, in the case of Twitter, reports claim that it is Musk's unpredictable actions that have resulted in negative numbers. Since the billionaire took over the social networking platform, he has widely laid off top executives, introduced a paid blue tick service, and banned high-profile users, which reports estimate as some of the reasons for Twitter's downfall. Additionally, Musk's content monetization approach and heavy interest payments also contribute significantly to the negative cash flow.

Layoff of Top Executives

Musk's decision to lay off top executives in order to cut costs and save the company from a $4 million daily loss did not yield positive results. The absence of experienced officers led to the loss of important business deals, prompting Twitter to ask dozens of fired employees to return to work.

Paid Blue Tick Service

Since Musk's takeover, the introduction of a paid blue tick service has upset the majority of Twitter users. Although the service was expected to generate an additional monthly revenue of $3.2 million for Twitter, nearly 80% of users rejected the payment, making it difficult for the platform to retain its user base.

Ban on High-profile Users

The ban on high-profile users did not sit well with advertisers, resulting in a significant loss of business interest in Twitter due to the unpredictable restrictions. The losses were so substantial that Elon Musk eventually unblocked a few of the restricted accounts.

Musk's Content Monetisation Approach

Musk's new approach to content monetization aimed to prevent unauthorized scraping of valuable data and generate business profits. However, it caused a drop in income. To avoid future losses, Musk appointed Linda Yaccarrino as the new CEO of Twitter, with a focus on videos, creators, and commerce partnerships to strengthen the company's business, according to a report.

Heavy Interest Payments

It is reported that Elon Musk borrowed a substantial amount of debt to acquire Twitter, resulting in the platform paying nearly $1.5 billion in annual interest, further exacerbating the company's negative cash flow.