Twitter Is Too Musk to Fail

Even though Twitter's finances are bad, Elon Musk would rather turn it into a money pit than let it fail.

Musk is at least having fun. Last week, Twitter's new owner asked his almost 119 million followers how to make a lot of money on social media. His answer was, "Start with a big one."

The #RIPTwitter hashtag, on the other hand, might be too soon. Major advertisers are leaving or pausing their business on the platform, thousands of employees have quit, there are a lot of stupid ideas, and offensive content is everywhere. But if Mr. Musk's first few weeks running Twitter have been a train wreck, few people seem to be able to look away.

Mr. Musk says that the number of users is now at an all-time high. Wall Street thought Twitter would have 256 million by the end of the year, but Mr. Musk's unaudited disclosures as of Nov. 20 suggest it is on track to have well over 266 million by the end of the year. That would mean growth of almost 23% in the fourth quarter of 2021, which is about the same as the growth rate in 2019 before the pandemic and 10 points higher than in 2021.

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Those numbers don't mean anything if the platform can't make enough money to stay open. When Mr. Musk said earlier this month that the company could go bankrupt, alarm bells went off. But he said the same things about Tesla and SpaceX, and they are still in business.

But Mr. Musk and his investors took on about $13 billion in debt to pay for the $44 billion purchase. The interest on this debt alone is more than Twitter's revenue in its last quarter as a public company, so the interest bill alone is more than $4 billion a year. About 90% of that money came from advertisers, and many of them are at least taking a break from the platform for the time being. He got rid of thousands of jobs, which will save money but could also hurt how well Twitter works or how well it brings in new customers.

When Mr. Musk said that he bought Twitter because it wasn't about the money, he was probably talking about how much it cost to buy, not how its failure could affect his overall net worth. Even though Tesla has dropped by 48% so far this year, it is still worth almost 10 times as much as General Motors. Most or all of that premium comes from his reputation as a smart and unique businessman.

Mr. Musk has already shown that he is willing to spend money on Twitter in order to save its reputation. He is in charge of everything right now, even though he could have hired someone else, and he has sent Tesla engineers to work on Twitter's problems. And after tweeting in August about how important it was to avoid an "emergency" sale of Tesla stock if he was forced by a court to buy Twitter, he sold another 19.5 million shares just days after the deal was done.

Elon Musk is showing that he is willing to dedicate resources to Twitter to save his reputation as a brilliant and unconventional businessman.Photo: Jakub Porzycki/Zuma Press

With 445 million Tesla shares still in his name as of last week, Mr. Musk has plenty more rabbits to pull out of just that hat, and he is a man who wears many of them. His options include somehow recapitalizing Twitter or perhaps buying its outstanding debt at a discount. In traditional business circles, his erratic behavior so far as “Chief Twit” and throwing good money after bad might be disqualifying. For someone whose wealth is tied to a financially unsophisticated crowd that reveres him for his apparent indifference to money and manners, though, letting Twitter crash and burn just isn’t an option.

Rumors of Twitter’s demise seem premature at best.

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