Reports that Elon Musk is looking to raise more equity for Twitter before year-end are the latest of a series of indications that the fate of the social media platform he bought for $US44 billion earlier this year is on a knife’s edge.
Advertisers are shunning a platform that generates about 90 per cent of its revenue from advertisements. There are also reports that Musk’s bankers are themselves trying to restructure the loans, which they were unable to syndicate and can’t get off their balance sheets without incurring multi-billion dollar losses.
With a forward price-earnings multiple of more than 30, Tesla’s share price remains vulnerable and the tie Musk has created with a floundering Twitter won’t help Tesla shareholders. There is now a Twitter shadow over Tesla that includes an over-hang in the market from the liens on Musk’s shareholdings and the potential for margin calls and/or further sales.
But there’s a glimmer of light. Defying some predictions that were based on the mass exodus of Twitter’s engineers, the platform hasn’t broken down and the volume of posts on Twitter seem to have increased significantly.