Musk Sacks Twitter Employees: Why is he so desperate?

Musk Sacks Twitter Employees: Why?

KAKALI DAS

What if you’re told that you don’t need to come to office anymore?

I hope that it won’t happen to you.

But it has happened at Twitter after Elon Musk’s takeover. Of 7500 work-force, Twitter is set to lay off roughly half of its employees. Is the world’s richest man taking measures to save money? To save Twitter?

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Sacking was expected after Musk’s complete takeover.

However, even supporters of Musk are themselves taken aback by the sackings, as it seems Musk is enjoying snatching jobs. Sacking is a thing in many industries. Facebook may also quietly sack 12,000 employees, Ed-tech industry in India also sacked many, but Twitter’s action is unapologetic and the worst. All are aware of his enmity towards Parag Agrawal – Twitter deal was forced on him. But, is this the way to get back at the company?

Let’s understand why there is sacking in large numbers. How will this make Twitter better? Or is there another angle to this?

Have you seen Squid Games on Netflix? Elon Musk is playing that with his employees.

Employees received an email – ‘times are tough’, ‘steps to be taken to save Twitter’ etc. etc. How to save it? By sacking – and sacking on email. Employees notified on official email if employment not impacted, otherwise on personal email. No sign off, no name – just the message in cold, straightforward language.

One email and you are out of employment – no discussion further. What’s even worse – many workers also revealed that they were remotely logged out of work laptops, without notice. This is how employees got to know of their sacking.

Elon Musk had wanted to lay off 75% staff, so it is no surprise, but the way it was done is not sitting well, even with Musk fans. Elon Musk seemed like a nice ambitious fellow who wanted to reach Mars – then why is this anger and desperation?

Musk agreed to the following terms of deal –

Employee compensation and benefits same for 1 year
Two months’ salary if laid off
Cash value of equity

Sources reveal that Musk has agreed to severance pay but not equity cash.

Class action lawsuit is now filed by workers against Twitter for mass layoff without proper notice, which is against California law. Worker Adjustment and Retraining Notification act (WARN) guideline suggests 60 days’ advance notice to employees. Twitter hasn’t commented yet – but lawsuit seeks order on Twitter not to forge document with employee to strike a deal on compensation.

Tesla had a similar story when 10% staff cuts kicked off. At that time, Tesla won a ruling from federal judge forcing workers to pursue close door arbitration.

Industry experts say that talented engineers will find a place elsewhere. But recession is fast approaching in America and job slowdown is near. Anyway, recession looms over America, while India is still said to be a bright spot in global economic system, especially in the IT sector. But, skilled workforce is still limited in our country.

Elon Musk is among the wealthiest – why is this behaviour then? Musk is quite active on Twitter making announcements every other day. The Chief Twit proposed $8 monthly fees for Twitter verification (first proposed price was $20). A price to pay to save free speech.

Musk said, Twitter will form content moderation council to review free speech policy. “Twitter can’t become a free-for-all hellscape”: Elon Musk explained to advertisers. First, “the bird is freed” tweet and now a ‘moderation council’ – an open letter to advertisers for money. Another floating idea is paid video feature – payment to access adult content.

Why are all these decisions taken suddenly?

Because Musk wants Twitter to be able to make money. Musk didn’t seriously want Twitter – the buyout was imposed upon him by a court at quoted price of $44 billion. Previously, Elon Musk had to step down as Tesla chairman and pay hefty fine in SEC settlement over joke about taking Tesla private.

Elon Musk wanted to withdraw offer, saying bots are a problem for Twitter deal. Musk wanted to abandon the proposed deal, but Twitter legally forced the deal to completion, settling in court. Musk didn’t want any more embarrassing information about him/his businesses leaked, and on top of that the judge was in no nonsense mood.

Ultimately, Elon Musk had to buy Twitter at the same price he had signed for – this is called rule of law.

Now about the maths of it – before acquisition, Twitter registered loss of $344 million in last quarter. Number of users on Twitter is stagnant more of less – board of directors didn’t expect much growth. The no. of users on Twitter is 4.36 million, and on Instagram, YouTube, Facebook are 1.5 billion, 2.5 billion and 3 billion respectively.

Optimism for Twitter was less – share price was low. Elon Musk thought he could work his magic somehow and proposed a deal. Being the richest man in the world, Musk has taken $13 billion loan to complete the deal.

As per calculations, interest to pay is $1 billion which is less than company profit in 2021. So, cost reduction was expected. No path to profitability is obvious – that is why Elon Musk is desperately trying to make money via Twitter – or else deal won’t pay off.

Also, the timing is not great either – online Ad spend is in decline post Covid-19; established names like FB, Google are also struggling with it. Now, Musk’s online banter and outspokenness has alerted Ad agencies to withdraw money – hence the $8/month proposal for verification badge.

The Verge calculated that if 400,000 people buy verification badge then it will bring $38 million – which is a fraction of a billion in interest payments. This won’t cover the cost. Meanwhile, those who sold Twitter are partying. Musk’s other companies took a hit. Tesla sank 50% in a year.

So, Twitter is a deal that took away not only money, but also time and resources – that could come handy at Tesla and SpaceX. Rich or poor – loan traps all. Bad calculation can be made my anyone (as of now path to profitability for Twitter is none).

That is why Elon Musk is desperate – so many layoffs and ideas floated to make money.

[Images from different sources]

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