As the firm fights Elon Musk in court over his $44 billion acquisition plan, Twitter has announced high losses and an unexpected drop in income in a softening advertising market.
The business reported a second-quarter loss of $270 million on Friday as revenue fell less than experts had predicted, by 1%, to $1.18 billion.
In a statement, Twitter cited “advertising headwinds” as well as “uncertainty relating to the prospective purchase of Twitter by an affiliate of Elon Musk” as the causes of its dropping income.
Overshadowing The most recent outcome of Twitter’s legal battle with Musk is that the world’s richest man is now attempting to back out of his April pledge to purchase the firm.
To close the agreement, Twitter last week sued Musk, and now the two parties are preparing for a trial in October.
The findings from Twitter came after Snap, the parent company of Snapchat, reported disappointing earnings and opted not to provide a projection, citing ‘extremely tough’ circumstances due to advertisers’ reduced spending.
In a positive development for Twitter, the number of daily active users increased by 16.6% to 237.8 million from the same time last year.
The advances were credited to “ongoing product enhancements and worldwide debate around current events,” according to Twitter.
Twitter said that it wouldn’t hold its customary quarterly results conference call or publish a shareholder letter due to the impending purchase.
Twitter shares dropped 1.6 percent in premarket trading, to $38.85.
That’s well below the $54.20 that Musk offered to pay for the shares in his April 25 agreement to buy the company — but up 6 percent from a week ago as Twitter has pressed its legal case against the billionaire.
‘The Street is already pricing in at a minimum a substantial monetary settlement from Musk into the stock,’ Wedbush analyst Dan Ives said in a note on Friday.
Ives, who set a $30 price objective on the shares, stated that the stock “will continue to move at fair value plus the probabilities of a deal or settlement with Musk as the court case in Delaware approaches in October.”
A turbulent three months for Twitter were included in the April-June fiscal quarter, beginning with the April 4 admission that Musk had bought a sizable interest in the business, opening the door for his takeover offer later that month.
The relationship quickly deteriorated as Musk openly tweeted his worries about Twitter and its staff and hinted that he was having second thoughts.
Musk’s conduct and his “continuous disparagement of Twitter and its workers,” according to Twitter’s legal argument, generated uncertainty that was detrimental to the company’s operations, personnel, and stock price.
Musk wanted to delay the trial until next year due to the intricacy of the case and his requests for more of Twitter’s internal data, while the company urged for an accelerated trial so that the firm could continue to make crucial business decisions.
Musk over how it counts automated and phony “spam bot” accounts, which he has described as a major factor in attempting to end the agreement.
The trial was postponed this week by the court, who agreed with Twitter that too much delay may hurt the firm irreparably.
Unless Musk and Twitter resolve the issue prior to that time, it will be heard in Delaware’s Court of Chancery, which hears several high-profile corporate disputes.