Twitter warns Musk risk factor could cost its staff and advertisers

May 3, 2022, 3:17 PM UTC
Updated May 3, 2022, 11:03 PM UTC

Twitter has identified none other than Elon Musk as a potential threat to its business, after the world’s richest man launched his $44 billion takeover offer.

In its risk report filed as part of its 10-Q, the company warned shareholders that it might fail to attract and retain users on its platform as a result of the bid, as well as lose advertisers and staff.

“[These include] our inability to attract and retain key personnel and recruit prospective employees, and the possibility that our current employees could be distracted, and their productivity decline as a result, due to uncertainty regarding the merger,” it wrote on Monday.

Workers at the company have been on high alert ever since the Tesla CEO scrapped plans to join the board and instead launched an unsolicited bid to acquire the company at $54.20 a share. 

Under pressure to lock in the 38% premium and lacking a “white knight” bidder to serve as a viable alternative, the social media company’s board voted unanimously late last month to recommend the deal move forward. 

Whereas Musk’s employees are urged to sacrifice their personal lives for the greater good of the company, Twitter has built a reputation for valuing work/life balance through features like its “focus week.”

High-profile staff targets

A self-proclaimed “free speech absolutist,” Musk has argued Twitter must open its algorithms up for transparency and scrutiny and apply a light touch to content moderation. 

He indicated changes were in store for Twitter’s board as well, as the company’s budget for board salaries would be slashed to zero—saving Twitter roughly $3 million—presumably because it will be abolished entirely.

Another high-profile target for Musk could be the company’s legal head responsible for policy, trust, and safety on the platform, Vijaya Gadde.  

Twitter warned that Elon Musk’s $44 billion takeover bid could lead to the loss of advertisers as well as key staff members, like its head of legal, Vijaya Gadde.
Martina Albertazzi—Bloomberg/Getty Images

According to a report in Politico, the 48-year-old Twitter executive wept during an internal meeting, acknowledging there are “significant uncertainties about what the company will look like under Musk’s leadership.”

The following day, the Tesla CEO criticized her decision to block the New York Post’s reporting that Hunter Biden had arranged a meeting between his father and Ukrainian business partners while he was still vice president under Obama, which the then-Democratic nominee denied.

“Suspending the account of a major news organization for publishing a truthful story was obviously incredibly inappropriate,” he fired back via Twitter. 

Musk also tweeted a meme of Gadde refuting her department’s left-wing bias, resulting in a deluge of abuse directed at her and prompting former Twitter CEO Dick Costolo to question his motives.

Breakup fee

These risks to the company’s operations, including a staff exodus, would not end necessarily either once the remaining formalities are dealt with and uncertainty over the deal is removed. 

“Our stockholders will forego the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent company,” Twitter wrote.

A risk report must however be seen in context: The primary goal is to indemnify the company against future litigation by shareholders.

As a result, they tend to feature thorough, if not exhaustive, lists of risk factors to try and shield the company from any conceivable legal attack down the road.

That means Twitter also warned it faces consequences if the deal does not go through as planned.   

Beyond paying a $1 billion breakup fee to Musk should it renege for whatever reason, the company warned a failure to bring the transaction over the finish line could also result in everything from a loss of prospective advertisers to a failure to retain key personnel, not to mention investor lawsuits.

Damned if you do, damned if you don’t seems to be the credo of Twitter’s lawyers.

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