Twitter employees may face 50% bonus cut on weak financial performance

The company’s chief financial officer cited advertising headwinds and uncertainty related to Musk’s pending acquisition for bonus warning

Elon Musk has accused Twitter of fraud, alleging the social media platform misled him about key aspects of its business before he agreed to a $44 billion buyout. AFP
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Twitter told its employees on Friday that they may receive only half of their annual bonuses because of the social media company’s financial performance.

The San Francisco-based company, which is suing Tesla founder Elon Musk to complete his $44 billion sale, made the announcement in an email to employees and blamed its financial performance for the potential bonus cut, according to the New York Times.

The micro-blogging website swung to a second-quarter net loss of more than $270 million compared with a net income of nearly $65.6m in the same period a year earlier. Its total revenue dropped roughly 1 per cent year-on-year to about $1.18bn in the three months to June 30.

The drop in sales reflected “advertising industry headwinds associated with the macro-environment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk”, Twitter said in a statement.

Mr Musk, the world’s richest person, agreed to acquire Twitter in a $44bn deal in April, pledging to pay $54.20 a share. Upon completion of the deal, the plan is for Twitter to be converted into a privately held company.

However, the deal is facing headwinds. On July 8, Mr Musk filed paperwork to terminate the transaction, claiming Twitter did not address enquiries on its “spam” or bot accounts, or provide him with relevant business information.

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

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

Ned Segal, Twitter’s chief financial officer, said these challenges would probably affect the annual bonuses that employees receive, with the bonus pool currently at 50 per cent of what it could be if the company met its financial targets, according to two employees who received the message, the New York Times article reported.

The figure could fluctuate throughout the year, based on Twitter’s earnings, according to the email.

Twitter ties its annual bonuses to its performance against revenue and profitability goals, Mr Segal told employees.

Advertising sales contributed more than 92 per cent to Twitter’s total revenue in the second quarter, growing 2 per cent on an annual basis to nearly $1.1bn in the quarter. However, revenue from subscriptions and other streams dropped 27 per cent yearly to $101m.

The company is reportedly planning to reduce its physical office space globally as it focuses on remote work to cut operational costs.

Twitter will cut back office space in many cities, including San Francisco, New York and Sydney, Bloomberg reported last month, citing an email sent to employees.

The company has also reportedly shelved plans to open an office in Oakland city.

It is also considering shutting various offices once leases expire, including those in Seoul, South Korea; Wellington, New Zealand; Osaka, Japan; Madrid, Spain; Hamburg, Germany; and Utrecht, the Netherlands, Bloomberg reported.

Corporate space in other key markets will be reduced, including Tokyo, Mumbai, New Delhi, Dublin and New York, it added.

Updated: August 20, 2022, 8:36 AM