Twitter shares fall after Q2 net loss amid Elon Musk deal uncertainty

Twitter shares rallied on Friday after falling in premarket trading as the company transitioned to a net loss of more than $270 million against a net profit of nearly $65.6 million in the same period a year earlier.

The company’s shares, which have fallen more than 7% year-to-date, were trading at $39.2 at 7:05 p.m. UAE time, after falling to $38.2 at 4:10 p.m.

The total from the San Francisco-based microblogging site revenue fell about 1% year-on-year to about $1.18 billion in the three months to June 30.

“Twitter Believes Mr. Musk’s Alleged Termination Is Invalid and Unfair, and Merger Agreement Remains Effective

Twitter

The drop in sales reflects “headwinds in the advertising industry associated with the macro environment as well as uncertainty related to Twitter’s impending acquisition by an Elon Musk subsidiary,” Twitter said in a statement.

Given the billionaire businessman’s impending acquisition of the company, Twitter said it would not host an earnings conference call, issue a letter to shareholders or provide financial guidance. for the current quarter.

Mr. Musk agreed to acquire Twitter in a $44 billion deal in April, pledging to pay $54.20 per share. Once the deal is done, Twitter is expected to convert to a private company.

However, the deal faces headwinds. On July 8, Mr. Musk filed documents to end the transaction, saying Twitter had not responded to inquiries about his “spam” or bot accounts, or provided him with business information. relevant.

On July 12, Twitter legally challenged Mr. Musk for breaching the agreement.

Last week, shares of Twitter fell from over $50 per share when the deal was announced in April to $32.55.

The Tesla and SpaceX founder asked for the trial to begin in February 2023, while the social networking company pleaded for an expedited trial given a lingering public dispute.

A Delaware judge has set an October date for the trial.

“Twitter believes that Mr. Musk’s alleged termination is invalid and abusive, and the merger agreement remains in effect,” the company said Friday.

In the second quarter, Twitter reported a 16.6% increase in monetizable daily active users to 237.8 million.

The increase was driven by “ongoing product improvements and global conversation around current events,” the company said.

Monetizable daily active users grew 14.7% year-over-year to 41.5 million in the US at the end of Q2, while grew 17% to 196.3 million internationally .

Ad sales contributed more than 92% of the company’s total revenue, growing 2% year on year to nearly $1.1 billion in the quarter.

Meanwhile, revenue from subscriptions and other streams fell 27% annually to $101 million.

Twitter spent more than $454.9 million on research and development in the second quarter.  AFP

The company’s capital expenditures in the second quarter totaled $154 million, a year-over-year decline of more than 44%.

Total costs and expenses increased more than 30% to more than $1.5 billion in the quarter.

It posted an operating loss of $344 million, compared with an operating profit of $30 million in the same period last year.

“Costs related to the pending acquisition of Twitter were approximately $33 million in the second quarter… [and] severance costs were approximately $19 million,” Twitter said.

Net cash provided by operating activities during the three-month period was $30 million, compared to $382 million in the same period last year.

Twitter spent more than $454.9 million on research and development, or nearly 38.7% of its total sales in the second quarter. This was 51.7% more than R&D spending for the same period in 2022.

Updated: July 22, 2022, 4:49 p.m.

Ann J. Cox