Twitter posts $270M loss after revenue dropped unexpectedly: Company blames Elon Musk for creating ‘uncertainty’ with his chaotic $44B takeover bid
- Twitter on Friday reported a second-quarter loss of $270 million
- Revenue declined unexpectedly to $1.18 billion, down 1% from last year
- Company cited ‘uncertainty’ related to Elon Musk’s offer to buy the company
- Twitter is trying to force Musk to make good on his $44B takeover promise
- Legal fight looms in Delaware court with expedited trial set for October
Twitter has reported steep losses and an unexpected decline in revenue in a weakening advertising market, as the company wages a legal battle with Elon Musk over his $44 billion buyout deal.
The company on Friday posted a second-quarter loss of $270 million after revenue dropped 1 percent from a year ago to $1.18 billion, less than analysts expected.
In a statement, Twitter blamed declining revenue on ‘advertising headwinds’ as well as ‘uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.’
Overshadowing Twitter’s latest results is its legal fight with Musk to make good on his April promise to buy the company, which the world’s richest man is now trying to back out of.
Twitter has reported steep losses and an unexpected decline in revenue in a weakening advertising market, as the company wages a legal battle with Elon Musk
Twitter shares dropped in pre-market trading after the results disappointed
Twitter last week sued Musk to complete the deal and both sides are bracing for an October courtroom trial to resolve the dispute.
Twitter’s results come after Snapchat parent Snap posted weak results and declined to make a forecast, citing ‘incredibly challenging’ conditions as advertisers cut back on spending.
In a bright spot for Twitter, the number of daily active users rose 16.6 percent to 237.8 million compared with the same period a year before.
Twitter chalked up the gains to ‘ongoing product improvements and global conversation around current events.’
Given the pending acquisition, Twitter said it wouldn’t hold its usual quarterly earnings conference call or issue a shareholder letter.
Twitter shares dropped 1.6 percent in premarket trading, to $38.85.
That’s well below the $54.20 that Musk offered to pay for the shares in his April 25 agreement to buy the company — but up 6 percent from a week ago as Twitter has pressed its legal case against the billionaire.
Overshadowing Twitter’s latest results is its legal fight with Musk to make good on his April promise to buy the company for $44 billion
Wedbush analyst Dan Ives wrote in a note on Friday that ‘the Street is now factoring in at a minimum a major cash settlement from Musk into the stock.’
‘The stock will continue to trade at fair value plus the odds of a deal or settlement with Musk as the court case in Delaware looms in October,’ wrote Ives, who has placed a price target of $30 on the shares.
The April-June fiscal quarter encompassed a tumultuous three months for Twitter, starting with the April 4 disclosure that Musk had acquired a huge stake in the company, paving the way for his takeover bid later that month.
It didn’t take long for the relationship to fray as Musk publicly tweeted his concerns about Twitter and its employees and signaled he was having second thoughts.
Twitter argued in court that Musk’s actions in and his ‘repeated disparagement of Twitter and its personnel’ created uncertainty that harmed Twitter´s business operations, employees and stock price.
Twitter filed the lawsuit (above) on Tuesday in Delaware Chancery Court and will look forward to October for the expected start of the trial
It called for an expedited trial so the company could carry on with important business decisions, while Musk sought to wait until next year because of the complexity of the case and his demands for more of Twitter’s internal data.
Musk about how it counts fake and automated ‘spam bot’ accounts – which he’s cited as a chief reason for trying to terminate the deal.
A judge this week set the trial for October, siding with Twitter’s concerns that too much delay could cause the company irreparable harm.
It will be held in Delaware’s Court of Chancery, which handles many high-profile business disputes, unless Musk and Twitter settle the case before then.