Twitter scraps earnings forecast, cites Elon Musk’s acquisition status

Twitter's monetizable daily active user base grew 15.9% year-over-year to 229 million in the first quarter of 2022.

Twitter investors are getting little visibility into the future after the social media company scrapped earnings guidance citing the agreement with Tesla CEO Elon Musk to go private at $54.20 per share

Ticker Security Last Change Change %
TWTR TWITTER INC. 37.40 -0.40 -1.06%

"Given the pending acquisition of Twitter by Elon Musk, we will not be providing any forward-looking guidance, and are withdrawing all previously provided goals and outlook," the company stated in its earnings release on Thursday.  

The deal, which is valued at $44 billion, is expected to close in 2022, subject to the approval of Twitter stockholders, the receipt of applicable regulatory approvals and the satisfaction of other customary closing conditions. Musk has secured approximately $46.5 billion to finance the transaction, including $25.5 billion of fully committed debt and margin loan financing and $21 billion in equity financing. 

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Twitter's monetizable daily active user base grew 15.9% year-over-year to 229 million in the first quarter of 2022. The figure includes 39.6 million daily active users in the U.S., up 6.4% year-over-year, and 189.4 million international daily active users, up 18.1% year-over-year. 

The company also corrected previously reported daily active user figures between the first quarter of 2019 and fourth quarter of 2021. The error was made after Twitter overcounted due to a feature launched in March 2019 that allowed users to link multiple separate accounts together. 

The social media giant reported net income of $513 million, 61 cents per share, compared to $68 million, or 8 cents per share a year ago. Twitter saw a pre-tax gain of $970 million during the quarter from the $1.05 billion sale of MoPub. Income taxes related to the gain were $331 million.

Twitter's total revenue came in at $1.2 billion, up 16% year-over-year, reflecting headwinds associated with the war in Ukraine. When excluding MoPub and MoPub Acquire, revenue grew 22% year-over-year. Advertising revenue increased 23% year-over-year to 1.11 billion, while subscription and other revenue decreased 31% year-over-year to $94 million. When excluding MoPub from the year ago period, the subscription and other revenue segment saw a 5% year-over-year decrease. 

Meanwhile, the company reported a $128 million operating loss due to a 35% year-over-year increase in cost and expenses totaling $1.33 billion. During the same period last year, Twitter reported operating income of $52 million.

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The deal with Musk came after the billionaire disclosed a 9.2% stake in the company on April 4. The self-described "free-speech absolutist" has been critical of the platform and its CEO Parag Agrawal's approach to free speech. 

Elon Musk and Parag Agrawal. (Reuters  | Twitter / Reuters Photos)

"Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated," Musk said in a statement. "I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it."

Though Musk was initially invited to join Twitter's board, he later declined the offer. If he joined, Musk would have been unable to own more than 14.9% of Twitter's stock while serving on the board or for 90 days after. Musk's board term would have expired at Twitter’s 2024 annual meeting.  Following Musk's offer, Twitter adopted a limited duration shareholder rights plan, commonly referred to as a poison pill, to prevent Musk or any other entity or group from acquiring beneficial ownership of 15% or more of Twitter's outstanding common stock in a transaction not approved by the board.

Musk told the TED2022 conference earlier this month that he intends to keep as many shareholders on board as possible through a private company.