Before the market opened on Friday, shares of social media companies were falling due to a flurry of news in the industry that alarmed investors, such as a rumour that Elon Musk may fire over 75% of Twitter’s employees and Snap’s tempered fourth-quarter guidance.
According to a Thursday story by The Washington Post, Musk has told potential investors in his purchase of Twitter that he expects to lay off about 75% of the company’s 7,500 employees, leaving it with a skeleton staff.
Twitter Inc. is poised for some employee cuts, according to Dan Ives of Wedbush, although the claimed number may not be the best strategy.
A number in the 75% zip code would be far too aggressive in our judgment right out of the gate, he wrote. “Musk cannot cut his way to growth with Twitter.”
A Delaware judge has given Musk and Twitter until Oct. 28 to work out details of the proposed $44 billion deal. If not, a trial will take place in November.
In premarket trade, Twitter shares fell more than 4%.
The shares of Snap Inc. fell more than 28% in the industry as a whole after the maker of Snapchat provided a gloomy prediction for the fourth quarter and its third-quarter sales fell short of Wall Street’s expectations.
Snap reported third-quarter revenue of $1. 13 billion, below the $1. 15 billion that analysts polled by Zacks Investment Research expected.
While the Santa Monica, California-based firm declined to provide a formal fourth-quarter outlook in a letter to investors, it did note that it is quite likely that year-over-year revenue growth will decrease during the quarter. According to Snap’s internal projections, yearly revenue growth will be roughly flat.
A JPMorgan analyst note said that Snap is experiencing weaker demand due to macro pressures, platform policy changes and competition.
The letter stated that although trends are still bumpy and the economic backdrop is probably going to get considerably harsher through 2023, “we welcome management’s attempts to control what they can—cutting costs & doubling down on more resilient performance-based advertisements.”
As the mid-term elections approach, worries over how social media platforms are being used add to the mix.
While platforms like Twitter, TikTok, Facebook and YouTube say they’ve expanded their work to detect and stop harmful claims that could suppress the vote or even lead to violent confrontations, a review of some of the sites shows they’re still playing catchup with 2020, when then-President Donald Trump’s lies about the election he lost to Joe Biden helped fuel an insurrection at the U. S. Capitol.
Facebook’s parent company, Meta Platforms Inc., saw a 4.5% fall in share price.
4% prior to the start of trading.
Others in the industry were also affected by the news flow, including Pinterest Inc. and Google parent Alphabet Inc., which both had declines of 2% and 8%, respectively.
Social media stocks decline on reports about Snap and Musk
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