While the perception of Elon Musk’s X project has shifted since the U.S. election, in which Musk helped Donald Trump regain the presidency, the company’s financials still don’t look great, and could still pose an existential risk for the platform, if it can’t win more advertisers back.
And reportedly, X is now taking extreme measures to do exactly, that, which even extends to threatening some former ad partners with legal action if they don’t resume spending.
And with Elon also now holding sway within the U.S. government, the fears of potential retribution are very real, and could help to get X’s financials back on the right track this year.
Right now, however, X is still in a tough spot.
According to the latest financial performance data that X recently shared with potential investors, X brought in $2.6 billion in total net revenue last year, which is significantly down on the $5.1 billion that Twitter generated in its last full year before Elon bought out the company (2021).
But X has also cut costs, by culling 80% of staff, and shutting down facilities, including several international offices. Yet even so, when combined with X’s existing debt burden, the company remains close to the edge.
As part of his takeover of the company, Musk borrowed a significant amount from various banks, which has loaded X with debt burden of around $1.2 billion in interest payments per year.
That leaves little room to move, and recent reports suggest that Elon informed staff last month that the company is barely breaking even.
Bloomberg also notes that there are various discrepancies in X’s most recent financials, which also raise concern:
“The 2024 figures weren’t audited, but the 2023 figures were [and] none of them would qualify for generally accepted accounting principles, also known as the GAAP standard that the US Securities and Exchange Commission requires for publicly traded companies.”
So while X is reporting that its revenue performance was relatively stable in 2024, the actual reporting of those numbers questionable, and these figures would not be acceptable from any publicly listed company.
Yet X is eyeing another fundraising round, reportedly at a $44 billion valuation. Which is nowhere close to what most investors now value the company at, but X seems to be of the belief that Musk’s political influence will be enough to boost its value, even if the market price doesn’t match.
And it’s also looking to use that influence to pressure its former ad partners.
Last August, X launched legal action against the Global Alliance for Responsible Media (GARM) and its chief coordinator, the World Federation of Advertisers (WFA), as well as selected GARM members, over what it claimed had been “a group boycott by competing advertisers of one of the most popular social media platforms in the United States.”
In the initial lawsuit, X named Unilever, Mars and CVS, among others, putting specific big name brands in the spotlight, and dragging them into what could be expensive legal action.
Shortly after, Unilever agreed to resume advertising on X, in order to get its name removed from the lawsuit. Then in January, X threatened to add other big-name brands into the action, essentially using it as a means to pressure them to resume their ad spend. In February, X added seven more big-name brands into the lawsuit.
Some advertisers have also suggested that X is now directly threatening that they’ll be added to the action as well, if they refuse to resume their ad spend, and again, with Elon also spending his days in the White House, and influencing government policy, there are real concerns that not returning to X could have serious business impacts, which could bring more ad partners back to the app.
Already, Amazon, Apple, and Kraft have resumed advertising on X, despite ongoing concerns around brand safety in ad placement.
Which puts X in a strange situation, in that it’s impossible to assess the potential of the app, without understanding the broader pressure that brands feel in avoiding the platform.
Which is why President Trump’s victory was so important to the app, because now, X and Musk exert an extra level of sway that could have a real impact on these brands, which may force them to spend with Musk to remain in his favor.
And with Musk’s xAI project is also raising funds, which could also drive additional income towards X (in paying for access to X data), X could be in a much better financial situation by this time next year, through implied pressure alone.
Make no mistake, a Trump loss would have been devastating for X, and may well have seen the app shut down this year. But now, everything is different, and that could see X have a significant turnaround, despite refusing to shift on previous brand concerns.
