Twitter: From tendency to tragedy

It is very likely that Elon Musk is one of the most controversial people today due to the controversial decisions he has made throughout his career. He has gradually lost his credibility and this has had an impact on the financial investments he has made in recent years. Let's talk about the previously known Twitter, now X. For the purposes of this blog, we will continue to refer to the company by its original name, since even the name was better before Musk arrived.

It turns out that the relationship between Twitter and Musk did not start on the right foot; since at one point in history, Elon decided not to continue with the purchase of the entity although this agreement had already been made public, causing an impact on the market and Twitter users; and because of this, the company decided to sue him, so he had no other choice than completing the acquisition.

Once the purchase of Twitter occurred, Elon Musk began to make a series of decisions that little by little reduced the value of the company. According to Fortune, the value of the equity is currently $19bn, a considerably lower amount if we take into account that Twitter was valuated and acquired for $44bn just a year ago, added to this, the company is also facing a debt of $13bn. Which means that now not only Twitter is facing financial problems, but also the banks that intervened for this acquisition to take place such as Barclays, Bank of America and Morgan Stanley are also suffering the consequences.

When analyzing the statistics, we can see that this acquisition is facing a lot of problematics and that the managers themselves have not developed strategies that are effective enough. Shareholders are withdrawing their investments from the company due to the lack of faith they have in it. Despite Musk's multiple attempts to turn a profit, Twitter has failed to stop having negative cash flow since it was purchased; which means that the big investment that was initially done by Elon is being lost, as well as the shareholder value.

The company has had to make quite drastic decisions in order to reduce its costs, such as cutting staff by 80%, however, they did not achieve positive results. On the contrary, millions of people worldwide disapproved of these actions since hundreds of people lost their jobs and opportunities. Their valuation is starting to decrease because they are loosing their most important intangible assets: human capital and clients.

People believed that this financial investment would be successful only because it was a powerful billionaire investing in one of the companies with the greatest international influence. Fortunately, or unfortunately, finance does not work like that, finance goes further, not even with all the money in the world can you ensure that your decision making is correct, and what is more, being a powerful man does not guarantee that you will not have great failures.

Companies should have stricter filters to determine who can lead them towards collective development, not just get carried away by the money that a billionaire can offer them in exchange for their company without taking into account all the other factors that will be affected if someone does not take the acquisition seriously and with sufficient commitment.

Before making any investment we must do an in-depth analysis of the opportunities and responsibilities that it will give us; have a complete picture of strategies, models, theories and action plans and ensure that our methods are more likely to work than to fail. I believe that Elon Musk did not make a well-thought-out financial investment, he saw an opportunity and took it but he did not give it the necessary seriousness or put together enough efforts to make the company increase its value.

I am not a psychic, but I honestly believe that Twitter will not be able to recover for a long period of time and Elon Musk will have to retire from the game for the company to recover, only in this way will people trust the social network again, otherwise, Twitter could be the next Yahoo that was forgotten from the last decade.

Sources: 

• https://www.ft.com/content/56cc3153-4862-4a3c-bc23-404a0810ab94