Elon Musk has unleashed chaos at Twitter in the few short weeks since he took the helm of the company, and experts say lawsuits, regulatory intervention and ultimate financial collapse could be on the horizon.
The billionaire has let his decision making play out on a public stage from the start, tweeting about new policies before promptly reversing them and polling users about features like verification.
“Please note that Twitter will do lots of dumb things in coming months,” Musk tweeted. “We will keep what works & change what doesn’t.”
Experts say this back-and-forth style of leading such a large company is unprecedented, and could spell trouble for Twitter’s future, as advertisers flee the disordered platform and regulators discuss potential investigations.
“He’s trying to decide what to do and clearly doesn’t have a plan – it’s absolute chaos,” said Anat Alon-Beck, a law professor at Case Western Reserve University in Ohio. “There has to be a responsible adult in the room, and it’s not Elon.”
Twitter and Musk face litigation
Analysts say that while Musk’s renegade management style at Twitter is not so different from how he has run companies in the past, those actions have not been without consequence.
The billionaire has faced lawsuits at other companies he leads, including space company SpaceX, car firm Tesla and brain-machine interface technology developer Neuralink.
As the Twitter meltdown continues, a lawsuit against Musk goes to court next week in which investors at Tesla have accused the billionaire of overpaying himself while not investing sufficient time in the company. Investors at Tesla have sued Musk in the past over accusations of workplace harassment damaging the brand and securities fraud over his tweet about taking Tesla private in 2018.
Twitter is already facing a lawsuit from some of the thousands of employees Musk laid off last week, who say they were not given proper notice of termination or sufficient severance pay. Alon-Beck said this is just the beginning of legal headaches for the company.
“Musk is going to be facing lawsuit after lawsuit after lawsuit,” she said. “There are so many issues he’s facing and will continue to face in regards to this acquisition, and a lot of cause for legal action.”
Regulatory intervention on the horizon
Aside from ongoing litigation from investors and employees, Musk could face investigations by regulatory bodies for his actions at Twitter, following allegations the company is shirking Federal Trade Commission (FTC) regulations.
The Verge reported on Thursday that Twitter may be neglecting to follow an FTC order issued in May after agreeing to a settlement with the agency that would require it to perform privacy reviews before making changes to products.
According to the report, Musk had already “bypassed standard data governance processes”, and an internal lawyer at the company warned that the company could be opening itself up to billions of dollars in fines. The FTC in response has said it is “tracking recent developments at Twitter with deep concern”.
“No CEO or company is above the law, and companies must follow our consent decrees,” the agency said in a statement. “Our revised order gives us new tools to ensure compliance, and we are prepared to use them.”
Bankruptcy concerns as advertisers flee
Advertisers are already jumping ship from Twitter, with General Mills, General Motors and other companies pausing messaging on the platform indefinitely over concerns about the instability of the company. Civil rights groups are calling for more companies to cut ties with Twitter over hate speech and misinformation.
The response from advertisers underscores how Musk’s leadership style fails to translate to Twitter. The company – unlike other Musk ventures – is largely dependent on advertising for funding, making his erratic behavior more consequential for the firm’s bottom line, said John P Wihbey, a professor of media innovation and technology at Northeastern University.
“Companies like Tesla or SpaceX are more dependent on hardware than what the public is saying,” Wihbey said. “But this is a business where advertisers can easily walk away, so it is not particularly savvy to create confusion and alienate large sections of the user base.”
This is bad news for Musk, who after purchasing Twitter for $44bn is under intense pressure to make the company profitable. The billionaire said Twitter was losing more than $4m a day and told staff on Thursday that “bankruptcy is not out of the question”.
While his erratic management style may have served him at other companies, with a platform like Twitter – largely dependent on advertisers for funding – it could quickly backfire, said Raj Shah, lead analyst for telecom, media and technology at digital transformation consultancy Publicis Sapient.
“Musk’s experience in leading companies with an attitude of ‘I have the big picture in mind and we’ll figure out how to get there along the way’ is not one that translates well to an important information and advertising platform where millions are dependent on the availability, stability and reliability of the technology and content,” he said.
“It’s time to put the maverick showman ego aside and craft a short-, mid- and long-term strategy,” Shah added.
