Elon Musk’s Efforts to End the Twitter Deal Puts Pressure on the CFO

Elon Musk’s attempt to end the Twitter acquisition a company

Complicating matters for Ned Segal, the social media company’s chief financial officer, who has been battling a drop in its share price as well as rising costs.

the master. Musk said Friday that he plans to abandon a $44 billion deal struck in April for Twitter because the company did not provide the information needed to assess the scale of fake accounts on its platform. Chairman Brett Taylor said Twitter was committed to closing the deal, adding that the company would pursue legal action to enforce the deal. Twitter on Monday posted a message dated July 10 stating that Mr. Musk’s effort to cancel the deal is a repudiation of his obligations under the merger agreement.

Justin Patterson, managing director of investment advisory services firm KeyBanc Capital Markets Inc.

A lawsuit between Twitter and Mr. Musk will put more pressure on the company’s share price. Since the deal was reached in late April, Twitter shares have fallen about 35%, compared to a roughly 10% drop in the S&P 500, as social media companies struggle with a weak digital advertising market.

Twitter was the worst performer in the S&P 500 on Monday. Shares of the company closed at $32.65 on Monday, nearly 40% less than the share price of $54.20 per share for Mr. Musk agreed to pay.

The company said in April that total costs and expenses, at $1.33 billion, were up 35% during the quarter ended March 31 compared to the same period a year earlier. Analysts said advertising revenue increased 23% to $1.1 billion, but that it could take a hit if the economic environment deteriorates.

Ned Segal, CFO of Twitter Inc.


Pictures:

David Paul Morris/Bloomberg News

the master. Segal, former Goldman Sachs group a company

The banker, who has been in charge of Twitter’s finances since 2017, recently benefited from lower financing costs and raising additional debt. The company said last week it was laying off 30% of its talent acquisition team after it said in May it would pause hiring and look to cut costs. Twitter said the layoffs are expected to affect less than 100 people and are limited to the talent acquisition team.

the master. Neil Bigley, Moody’s senior vice president, said Musk’s attempt to walk away from the deal is not expected to negatively impact Twitter’s capital structure. corp.

rating company.

The deal was expected to triple Twitter’s influence and add hundreds of millions of dollars to interest. The company will be “in a better position” if the deal is cancelled, Mr. Begley added.

Twitter’s cash and cash equivalents fell to $2.30 billion during the first quarter of the year, from $4.25 billion in the same period a year earlier. Its short-term investment fell 12.7% during the quarter, to about $4 billion, down from $4.55 billion a year ago. Twitter’s total debt was about $6.62 billion at the end of the first quarter, up from $5.54 billion at the end of 2021, according to data provider S&P Global Market Intelligence.

Much of the debt is held in the form of convertible and large bonds, and Twitter doesn’t have a maturity date coming this year or next, according to S&P. Standard & Poor’s data showed that Twitter acquired about $2.43 billion in additional debt earlier this year, also in the form of convertible bonds.

Credit rating agency Standard & Poor’s said Thursday that Twitter’s BB+ rating, which is below investment grade, remains under negative credit watch and this potential litigation between the company and Mr. Musk adds uncertainty around the deal.

Besides the hiring freeze, Twitter has seen a number of exits by high-profile managers, including Bruce Falck, general manager of revenue, and Kayvon Beykpour, general manager of consumer business.

Mark Mahaney, senior managing director of banking consultancy firm Evercore, said the recent turmoil will likely hurt employee morale, which could dampen advertising revenue because employees may be less motivated to pursue new deals. a company

“There’s all this uncertainty, which must be demoralizing. I’m sure it made it difficult for them to generate revenue, at a time when we would probably go into a recession in advertising.” I think for the CFO, that must be a nightmare .”

the master. musk and mr. Seagal did not respond to a request for comment. Twitter declined to comment.

write to Jennifer Williams-Alvarez at jennifer.williams-alvarez@wsj.com

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