If Elon Musk's X is 'barely breaking even,' could AI be the answer?
As a brand, X’s value dropped to $673 million last year. To attract investors today, the lenders will need to pitch to investors about the long-term prospects of X.
Chief Twit Elon Musk has told his employees at X that the company is “barely breaking even”. He reportedly emailed staff about the business being in a “very dire situation from a revenue standpoint”.
In the missive sent earlier this month, Musk purportedly wrote: “Our user growth is stagnant, revenue is unimpressive, and we’re barely breaking even.”
Banks selling $13 billion in debt from Twitter deal: report
News of X’s alleged financial struggles came to light after the Wall Street Journal reported a plan by banks to sell off part of the US$13 billion in debt they incurred from the Twitter acquisition.
The lenders decided to finance the deal to help Musk purchase the social media company for $44 billion in 2022.
Now, Morgan Stanley, Barclays, and Bank of America are reportedly asking investors to ease their financial strain. The lenders are allegedly finding it difficult to turn a profit from X.
On the table is $3 billion of debt up for sale. The rest of the $13 billion debt, however, would remain in the hands of bankers who want to avoid selling at a loss.
On X, however, Musk accused the WSJ of lying and denied sending the message to staff. “This report is false. I sent no such email,” the tech billionaire said.
Also Read: Musk and his 'X'plorations with Twitter
Musk suing advertisers for leaving X
This isn’t the first time Musk has bemoaned the financial health of the company.
However, despite X’s supposed “power in shaping national conversations and outcomes” – and Musk promoting belief in his version of “unbiased truth” – X has been losing money ever since he took over.
His troubles seemed to have worsened when some companies advertising on the platform left supposedly because of questionable content that was appearing beside their ads.
Also Read: Musk unveils xAI to go head to head with OpenAI
While the brouhaha is far from being the only setback Musk has faced at X, the continuing spat with advertisers – a number of whom he has sued and a few more he plans to – hasn’t helped his case.
Ad revenue had long been X’s top source of income even before Musk came on board, but it plummeted from $1 billion per quarter in 2022 to only about $600 million per quarter in 2023.
As a brand, X’s value dropped to $673 million last year.
To attract investors today, the lenders will need to pitch to investors about the long-term prospects of X, industry observers said.
Some investors who follow Musk and US President Donald Trump’s close alliance are keen to buy the debt, predicting that X is on an “upward trajectory” in the current political climate, according to the WSJ report.
What will become of X?
Two things are possible for X, though these are not mutually exclusive.
The Verge reported Musk has been using X to test AI tools on the platform. He appears to be expanding its features such as Grok, the generative AI assistant. It’s likely he will remain on this path.
Musk could also continue building following on the social network among a particular demographic: supporters of Trump and the far-right in general.
In this scenario, while Musk might continue to struggle with winning over advertisers, he could continue wooing end users who share his political beliefs.