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Despite Musk Investment, Twitter Remains Troubled

Elon Musk
Win McNamee / Getty Images News via Getty Images

The billionaire head of Tesla, Elon Musk, has just bought over 9% of the stock in Twitter Inc. (NYSE: TWTR). Its shares rose 21% on the news. This is an overreaction. Twitter remains a deeply troubled company. One investment will not change that, particularly because Musk will be a passive investor. Before Musk put his money in, Twitter’s shares were down 40% over the past year.

Twitter’s net income dropped in the most recently reported quarter, to $182 million from $222 million in the same period a year ago. Daily active users as the period ended totaled 217 million. In the previous quarter, the figure was 211 million. Twitter is not growing. Twitter’s financial outlook for the current quarter also was disappointing.

Though Twitter also announced a share buyback of $4 billion, investors were not impressed.

Twitter continues to suffer from the fact that it has been difficult to monitize its users and it has had difficulty controlling “bad actors.” This has been a problem across all major media sites. It remains to be seen the extent to which the government may step in to regulate this, which means many Twitter accounts could be closed.

It would be better if Musk did become active. The board at Twitter needs to be changed. It includes Omid Kordestani, former executive chairperson at Twitter. It also includes two directors who have few qualifications: David Rosenblatt, who is chief executive of 1stdibs.com, and Martha Lane Fox, founder and chair of Lucky Voice Group, co-founder and former managing director of lastminute.com and Crossbench Peer, House of Lords. Twitter would be better served with directors who have reasonable experience.

Thanks to Musk, the shares surged. That won’t continue.


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