Twitter Cites Elon Musk, Economic Conditions As Q2 Numbers Fall Short

Twitter swung to a loss in the June quarter and revenue was below Wall Street forecasts of Wall Street, blaming advertising industry headwinds and uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.

It swung to a $270 million loss from a $66 million profit the year earlier. Revenue of $1.18 billion was down 1% year-over-year (or up  2% on a constant currently basis that excludes foreign exchange fluctuations).

Twitter shares are down 1.7%. It reported after Snap, whose stock is getting pummeled after disappointing quarterly numbers yesterday afternoon that raised massive red flags for the digital advertising business in the midst of high inflation, rising interest rate and war in Europe.

As Snap explained Wednesday, ad budgets are among the outlays to be cut by companies under pressure. Its share are down 33%. Wall Street is bracing for a raft of tech earnings next week.

Twitter clocked 237.8 million MAUs, or monetizable daily active users, up 17% from last year’s quarter but lower than anticipated — all as the company prepares to enter the ring with Elon Musk.

The June quarter numbers come two days after a judge set October for a five-day trail in a lawsuit the social media platform filed against the billionaire Tesla founder, who acquired a large stake in Twitter and agreed to buy it last spring, but unilaterally terminated the deal early this month.

“Given the pending acquisition of Twitter by an affiliate of Elon Musk, we will not host an earnings conference call, issue a shareholder letter, or provide financial guidance in conjunction with our second quarter 2022 earnings release,” said Twitter, so there won’t be any color around that. It did include some boilerplate background on dispute.

“As announced on April 25, 2022, we entered into a merger agreement, pursuant to which Twitter agreed to be acquired by an entity wholly owned by Elon Musk, for $54.20 per share in cash. Upon completion of the
transaction, Twitter will become a privately held company.

On July 8, 2022, representatives of Mr. Musk delivered a notice purporting to terminate the merger agreement. Twitter believes that Mr. Musk’s purported termination is invalid and wrongful, and the merger agreement remains in effect.

On July 12, 2022, Twitter commenced litigation against Mr. Musk and certain of his affiliates to cause them to specifically perform their obligations under the merger agreement and consummate the closing in
accordance with the terms of the merger agreement.

On July 19, 2022, Twitter’s request for an expedited trial was
granted, and the trial is being scheduled for October 2022.”

Adoption of the merger agreement by our stockholders is the only remaining approval or regulatory condition to completing the merger under the merger agreement. The exact timing of completion of the merger, if at all, cannot be predicted because the merger is subject to ongoing litigation, adoption of the merger agreement by our stockholders and the satisfaction of the remaining closing conditions.”

The court’s ruling for an October trial — the company had asked for September — was a victory. The Musk camp had hoped for a delay until February in Delaware Chancery Court. The judge agreed with Twitter that prolonged uncertainty risks irreparable harm to the company’s business.

Twitter’s operating loss was $344 million, representing a 29% decrease in operating margin, compared to operating income of $30 million, or a 3% operating margin in the same period last year.

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