Elon Musk has unleashed chaos on Twitter in the weeks since he took over as CEO, and experts say lawsuits, regulatory intervention and ultimate financial meltdown could be on the horizon.
The billionaire let his decision-making happen in a public arena from the start, tweeting about new policies before quickly rolling them back and asking users about features like verification.
“Please note that Twitter will be doing a lot of stupid things in the coming months,” Musk said. tweeted. “We will keep what works and change what doesn’t.”
Experts say this back-and-forth style at the helm of such a big company is unprecedented and could spell trouble for Twitter’s future as advertisers flee the messy platform and regulators are discussing 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, professor of law at Case Western Reserve University in Ohio. “There must be a responsible adult in the room, and it’s not Elon.”
Twitter and Musk facing litigation
Analysts say that while Musk’s renegade management style on Twitter isn’t all that different from how he’s run companies in the past, those actions weren’t without consequence.
The billionaire has faced lawsuits at other companies he runs, including space company SpaceX, car company Tesla and brain-machine interface technology developer Neuralink.
As Twitter’s meltdown continues, a lawsuit against Musk is heading to court next week in which Tesla investors have accused the billionaire of overpaying himself while failing to invest enough time in the project. ‘company. Tesla investors have sued Musk in the past on charges of brand-infringing workplace harassment and securities fraud over his tweet about Tesla’s 2018 privatization.
Twitter is already facing legal action from some of the thousands of employees Musk fired last week, who say they weren’t given proper severance notice or sufficient severance pay. Alon-Beck said this was just the start of legal headaches for the company.
“Musk is going to face trial after trial after trial,” she said. “There are so many issues he faces and will continue to face with respect to this acquisition, and numerous causes of legal action.”
Regulatory intervention on the horizon
In addition to ongoing litigation from investors and employees, Musk could face investigations by regulators for his actions on Twitter, following allegations that the company exempt from Federal Trade Commission (FTC) regulations.
The Verge reported 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 in-house lawyer for the company warned that the company could face billions of dollars in fines. In response, the FTC said it “is following recent developments on 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 ready to use them.”
Bankruptcy risks as advertisers flee
Advertisers are already leaving Twitter, with General Mills, General Motors and other companies suspending messaging on the platform indefinitely due to concerns about the company’s instability. Civil rights groups are calling on more companies to sever ties with Twitter over hate speech and misinformation.
Advertisers’ response highlights how Musk’s leadership style doesn’t translate to Twitter. The company — unlike other Musk ventures — relies heavily on advertising for its funding, which makes its erratic behavior more important to the company’s bottom line, said John P Wihbey, professor of innovation and technology at media at Northeastern University.
“Companies like Tesla or SpaceX are more dependent on hardware than the public says,” Wihbey said. “But this is a business where advertisers can easily walk away, so it’s not particularly wise to confuse and alienate large swaths of the user base.”
That’s bad news for Musk who, after buying Twitter for $44 billion, is under intense pressure to make the company profitable. The billionaire said Twitter was losing more than $4 million a day and told staff on Thursday that “bankruptcy is not out of the question.”
While his erratic management style may have served him well in other businesses, with a platform like Twitter – largely dependent on advertisers for funding – it could quickly backfire, says Raj Shah , senior telecoms, media and technology analyst at digital transformation consultancy Publicis Sapient.
“Musk’s experience at leading companies with an attitude of ‘I’ve got the big picture and we’ll figure out how to get there along the way’ isn’t one that translates well to a major platform. form of information and advertising where millions of people depend on the availability, stability and reliability of technology and content,” he said.
“It’s time to put aside the maverick showman ego and strategize for the short, medium and long term,” Shah added.
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