Musk warns of Twitter bankruptcy as more senior executives quit

Nov 10 (Reuters) – Twitter Inc’s new owner Elon Musk raised the possibility of the social media platform going bankrupt on Thursday, capping a tumultuous day that included a warning from a U.S. privacy regulator and the exit of the company’s trust and security leader.

The billionaire said on his first conference call with employees that he could not rule out bankruptcy, Bloomberg News reported, two weeks after buying it for $44 billion — a deal that credit experts say has left Twitter’s finances precarious.

Earlier in the day, in his first company-wide email, Musk warned that Twitter “will not be able to survive the coming economic downturn” if it fails to increase subscription revenue to offset declining advertising revenue, three people who saw the messages told Reuters.

Joel Roth, who oversaw Twitter’s response to combating hate speech, misinformation and spam on the service, resigned on Thursday, two people familiar with the matter told Reuters.

In his Twitter profile on Thursday, Roth described himself as the “former head of trust and security” at the company.

Roth did not respond to requests for comment. Bloomberg and tech site Platformer first reported his exit.

Earlier on Thursday, Twitter’s Chief Information Security Officer Lee Kisner tweeted that she had resigned.

Chief privacy officer Damien Kieran and chief compliance officer Marianne Fogarty also resigned, according to an internal message posted on Twitter’s Slack messaging system on Thursday by a lawyer from its privacy team and seen by Reuters.

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Robin Wheeler, the company’s top ad sales executive, told employees in a memo that she was staying at the company, a person saw the message, diverging from earlier media reports that she too was leaving.

“I’m still here,” Wheeler tweeted late Thursday.

The US Federal Trade Commission said it was viewing Twitter with “deep concern” after three privacy and compliance officers resigned. The resignations put Twitter at risk of violating regulatory orders.

Musk attorney Alex Spiro said in an email to some employees late Thursday that Twitter would continue to comply.

“We spoke with the FTC today about our continuing obligations and have a constructive ongoing dialogue,” Spiro wrote.

He noted that only Twitter, not individual employees, could be held liable against the orders.

“I understand there are employees on Twitter who are not even working on the FTC case and are commenting that they could (go) to jail if we don’t comply — that’s not how it works,” he wrote.

In his first meeting with several employees on Twitter on Thursday afternoon, Musk warned that the company could lose billions of dollars next year, according to reports.

Musk added in an email to workers that remote work will no longer be allowed and that they will be expected to spend at least 40 hours in the office per week.

Twitter, Musk and Spiro did not respond to requests for comment on the potential bankruptcy, FTC warning or exit.

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27 Oct. Musk went on a ruthless clean house after taking over on , and has said the company was losing more than $4 million a day, largely because advertisers began fleeing after he took over.

Twitter has $13 billion in debt after the deal and $1.2 billion in total interest payments over the next 12 months. The payments exceed Twitter’s most recently disclosed cash flow, which stood at $1.1 billion at the end of June.

Musk has started charging $8 per month for the Twitter Blue service that will include Blue Check verification.

Warning

“We are following recent developments on Twitter with grave concern,” FTC director of public affairs Douglas Farrar told Reuters.

“No CEO or company is above the law and companies must comply with our consent decree. Our revised consent decree gives us new tools to ensure compliance and we are prepared to use them,” Farrar said.

In May, Twitter agreed to pay $150 million to settle allegations by the FTC that it misused private information, such as phone numbers, to target ads to users after saying the information was collected only for security reasons.

Twitter’s privacy attorney noted in an internal memo Thursday that Spiro had said Musk was willing to take a “substantial amount of risk” with the company. “Elon puts rockets in space, he’s not afraid of the FTC,” the attorney quoted Spiro as saying.

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The Twitter purchase has raised concerns that Musk, often embroiled in political debates, could face pressure from countries seeking to control online speech.

US President Joe Biden was prompted on Wednesday to say that Musk’s “collaboration and/or technical relationship with other countries is something to watch.”

Advertisers are not convinced

Speaking on Twitter’s Spaces feature, Musk told advertisers on Wednesday that he aims to make the platform a force for truth and stop fake accounts.

His promises will not be enough.

Chipotle Mexican Grill ( CMG.N ) said on Thursday it had pulled back paid and owned content on Twitter “as we better understand the direction of the platform under its new leadership.”

It joins other brands, including General Motors ( GM.N ), that have paused advertising on Twitter since Musk took office, as he looks to loosen content control rules.

Reporting by Katie Paul in Palo Alto, California and Paresh Dave in Oakland, California; Additional reporting by Jeffrey Destin in Palo Alto, Diane Bartz in Washington, Yuvraj Malik and Fanny Potkin and Hyunju Jin in Bengaluru; Written by Sayantani Ghosh; Editing by Shaunak Dasgupta, Bill Berkrot, Deepa Babington and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

Paresh Dave

Thomson Reuters

San Francisco Bay Area-based tech reporter Google and the rest of Alphabet Inc. Joined Reuters in 2017 after four years at the Los Angeles Times focusing on the local technology industry.

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