Uncertainty over Musk’s purchase operation weighs down Twitter’s results in the second quarter

An image of Elon Musk on a mobile screen next to Twitter logos. Reuters

Twitter shares have plunged this Friday after the social media platform, embroiled in a legal battle with Elon Musk for the suspended purchase operation, will report that it has lost 270 million dollars (264 million euros) in the second quarter due to doubts about “the pending acquisition operation” by the tycoon. The company that owns the little bird’s social network is ahead of other technology companies such as Alphabet, Apple, Meta and Microsoft, which will report their earnings next week in a worrying scenario for the sector. Twitter had registered a net profit of 65 million in the same period of 2021, as reported by the multinational in a statement. Twitter’s income between April and June totaled 1,176.6 million dollars (1,153 million euros), 1.1% less than a year earlier.

The rudeness and scares of Elon Musk have not only contributed to fueling uncertainty about the direction of Twitter, they have also undermined its credibility, according to analysts, which translates into a loss of value. In fact, Twitter and Musk will face each other in court in October, after the lawyers of the richest man in the world requested an extension to liquidate the process until February 2023. The main objections of the founder of Tesla and SpaceX have to do with the number of fake accounts and bots on the social network.

Between April and June, Twitter advertising revenue increased by 2.2% year-on-year, to 1,076 million dollars (1,054 million euros), while revenue from subscriptions fell 26.3%, to 101 million dollars. International revenue fell 4% to $515 million.

In this way, in the first half of this year the company obtained a net profit of 243.3 million dollars (238 million euros), 82% more than a year before, while revenues increased by 6.8% , up to 2,377.6 million dollars (2,330 million euros).

Better data offers the average monetizable daily active users, which between April and June reached 237.8 million, an increase of almost nine million compared to the first three months of 2022 and 16.6% in one year. The controversy generated by the purchase operation launched by Musk, in a social network that is especially prone to noise, has worked as a driving force.

Of the total monetizable active daily users, 41.5 million visited the network in the United States at the end of the second quarter, compared to 39.6 million in the first quarter (14.7% more than a year earlier). In the rest of the world, the annual increase was 17%, to 196.3 million, compared to 189.4 in the first quarter.

On Tuesday, Delaware Court of Chancery Judge Jude McCormick ruled that the trial for the reversal of Elon Musk in the purchase of Twitter is held in October, after the tycoon had requested to delay it to February in order to better prepare the defense of the case. McCormick thus agreed with the company, which had asked to “expedite” the trial, albeit to September. At stake is a $44 billion operation that revolutionized not only the sector, but also the global economy.

After three months of denials and rumours, with up-to-the-minute media coverage, Musk informed Twitter on July 8 of his resignation from the social network purchase contract after not receiving a response from the company about the number of false accounts that exist on the platform, as well as the method followed by the company to audit and suspend them. It was not Musk’s first rudeness, who in mid-May temporarily suspended the purchase Dissatisfied with the calculation of false accounts of the company, less than 5% of the profiles according to Twitter.

They paint coarse for the technology companies, with hiring plans slowed down by the economic uncertainty, if not waves of layoffs, a phenomenon that is especially noteworthy in the startup. Snap shares plunged yesterday after disappointing quarterly results. The company, which runs the Snapchat social media platform, said it would “substantially reduce” hiring and that revenue growth in the current quarter has been “approximately zero.” The current macroeconomic climate seems to be elusive to digital.

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Uncertainty over Musk’s purchase operation weighs down Twitter’s results in the second quarter