Musk Effect? Twitter Announces Disappointing Quarter Earnings

Musk Effect? Twitter Announces Disappointing Quarter Earnings

Twitter missed projections for earnings, revenue, and user growth.

It was the quarter when the company announced that it was being acquired by Elon Musk, though the deal was eventually called off by Musk and is now stuck in litigation.

However, per CNBC, Twitter missed projections for earnings, revenue, and user growth. The company cited “uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.”

Twitter’s earnings release proceeded as though the deal is still going through.

“As announced on April 25, 2022, we entered into a definitive agreement to be acquired by an entity wholly owned by Elon Musk, for $54.20 per share in cash,” the company said in its earnings release. “Upon completion of the transaction, Twitter will become a privately held company. The transaction is subject to customary closing conditions and completion of regulatory review and Twitter’s stockholder approval. The transaction, which is expected to close in 2022, has been approved by the board of directors of Twitter.”

The company, as was the case in the first quarter, will not host an earnings conference call.

Twitter announced two weeks ago that it is suing Musk in the Delaware Court of Chancery, a few days after he announced its intention to exit the merger agreement.

“Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” the lawsuit said. “Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and…walk away.”

Analyst Daniel Ives of Wedbush Securities discussed the results Friday.

“Overall we would characterize the DAU metrics as better than feared and holding up relatively firm in this environment. When compared to the nightmare quarter of SNAP last night, it shows digital ad spending is not falling off a cliff like feared which is a positive for others in the space such as Facebook, Pinterest, and Google,” Ives wrote in a note to clients, keeping up his “Neutral” rating for 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,” he wrote. “We believe Twitter has a clear upper hand legally speaking as the Street is now factoring in at a minimum a major cash settlement from Musk into the stock ($5 billion-$10 billion range) or potentially Musk ultimately still buying Twitter at the $54.20/$44 billion if the Delaware court upholds this deal.”

Stephen Silver, a technology writer for The National Interest, is a journalist, essayist, and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.

Image: Reuters.