Monday, February 22, 2016

Why Twitter's Politics Ultimately Doesn't Matter

With the much publicized removal of Milo Yiannopoulus' Twitter account's "authenticity", not to mention the outright removal of various controversial conservative twitterers' Twitter accounts, many on the right are up in arms about what seems to be a purposed, biased, and leftist agenda by Twitter to essentially limit the speech of those on the right.

Does Twitter have the right to do such things?

Should Twitter ban anybody?

Is Twitter's bias to the left?

Should we form another "alternative Twitter?"

But all of this debate and kerfuffle about Twitter and how they seem to have it out for non-leftists is moot because while it is immoral and wrong to let politics influence what is effectively an avenue of speech, the simple truth is...

Twitter is not going to exist much longer. 

The cold hard truth is that Twitter is not financially viable.  It's bankrupt, it's insolvent, and unless they start making some killer profit in the next 6 months they are either going to have to file for bankruptcy or find a VERY charitable investor to infuse their money-losing operation with tons of cash just to keep it afloat another couple years.

You can look at the details here and here, but after issuing "convertible notes" (which is just a fancy term for "borrow money") on the order of $1.8 billion in 2014, the company simply lost ANOTHER $500 million in 2015 like it did in 2014.  This is in addition to the perpetual string of annual losses it has ran since...well..forever, and is proof the company is just not a profitable concern.

But what is particularly interesting about this Dotcom Bomb v. 2.0 are two items.

One, if you look at their cash flow statement the majority of "investments" they make are not in property, plant, or equipment, but marketable securities (stocks and bonds).  This would be normal if Twitter were a hedge fund or an investment bank.  But since it's a social media tech company, it's a sign they don't have faith in their core business and seem to think dumping the proceeds from that $1.8 billion loan into the stock market is a better investment.

Two, the media's BLATANT attempt to mask Twitter's financial problems as "growing pains" or just "standard operating procedure" for a start up (search any new article about Twitter's finances).

I'm sorry, but NO, this is PRECISELY the same BS I saw in the run up to the Dotcom bubble and the housing bubble as well.  Charlatan Wall Street talking heads drowning you with pablum to obfuscate the fact this company is a money-losing craphole and has no value.  I don't know how many bubbles we have to go through where a company loses half a billion dollars a year (after year...after year...after year) before sanity sinks into the heads of retail and institutional investors and they realize "Oh, crap!  This company is garbage!" but apparently it's happening here again.  I'm too tired to find out why this is this time (politics, feel good pretty lies, connections, big money backing, etc.), but buying a company that is losing all of its real equity balance every year is like paying somebody to punch you in the face.  It plain doesn't make sense.

Ultimately, my point about Twitter is not one of finances or economics.  It's not even one of politics.  It's one of philosophy.

Look, yes, I know Twitter may have a bias against anybody not-left.  I know Twitter likely has leftists working at its helm and in its ranks.  And I know it's dishonorable to ban people for their political opinions.  But it ultimately doesn't matter what Twitter does politically because unless it's bailed out by a rich benefactor, it's going to inevitably run out of money and shut down.  The only way it can continue to exist is if the democrat party (or a branch thereof) continues to perpetually fund it as a money-losing, but press-releasing media arm (which I would not be surprised if they do).

Otherwise, may I suggest for both of you on the right and left who use it as a social media press-release tool to start finding an alternative? Because that which cannot go on forever, won't.

Aaron Clarey is a mean, hate filled economist who unleashes his hatred upon society by telling the truth and putting reality above people's feelings.  You can hire him at his consultancy, Asshole Consulting. You may also buy his latest book "Curse of the High IQ" where he explains why you are surrounded by a world full of idiots.


BigFire said...

I think Twitter management is actively shorting their own stock, and they think the price is still too high. Afterall, if you have a failing business, why would you go out of your way to make it failed faster?

Mike said...

I started following you about a month ago, Cappie, and I'm loving it! Learning a lot. Keep up the good work! Going to buy a couple of your books pretty soon.

sth_txs said...

Cappy, maybe you could do an article about the Big 3 (Ford, GM, Chrysler) and their financial liabilities. It was my understanding that even 10 years ago they had billions of debt that can never really be paid off. I saw an article the other day where GM was taking on more debt to pay pensioners. You would think these companies would have been liquidated and dead by now.

I guess we keep them around because if war comes, buying tanks from China is not an option.

grey enlightenment said...

I don't like twitter that much either, but I'm sure they are not close to bankrupt. They have a lot of cash from the IPO and their business is now cashflow positive . They reason why Twitter has taken on debt is to avoid depleting their cash reserve. Twitter is able to raise cash fairly cheaply

If you think it will go bankrupt, go ahead and buy put options on it.

Scott Alfter said...

I never really "bought into" Twatter (and kinda wish an ex-girlfriend hadn't dragged me onto Farcebook), but there are decentralized, federated alternatives to both. For a replacement for Farcebook, you might want to look into Diaspora. I've had it running on a VPS for about a month; you can either run your own node (or "pod," as they call it) or use someone else's. For an alternative to Twatter, I've mostly heard people refer to GNU social.

Anonymous said...

I agree with grey. It costs next to nothing to actually operate the service, and if they are willing to stop trying to grow and improve it, they can fire almost all of their staff and still maintain it. I applied there once and I know they have some non-leftists, they are certainly no worse than anyone else out there and better than Facebook and a lot of others.

David Foster said...

"Does Twitter have the right to do such things?"

Actually, maybe not. Twitter management has a fiduciary obligation to their shareholders; they are supposed to be running a profit-making (or at least profit-seeking) business, not a political PAC.

Alienating 50% of their potential market may not be consistent with that obligation.

One of these days, there are going to be shareholder lawsuits against a whole range of companies/management groups concerning this issue.

The Bechtloff said...

I remember back when I first got on Twitter in like 2013 "This is a fun site and all but how the hell does it make any money?"

Apparently it doesn't.

Unknown said...

I don't even know how Twitter makes money. I know they must make money, but I rarely see any ads.

And there are a lot of people who get targeted visitors to their landing sites and blogs without paying much.

So maybe charging people for using it might be a way to go.

Anonymous said...

Grey enlightenment:

I agree. I doubt Twitter is close to bankruptcy, yet, but the company is showing signs of trouble. Any media company that actively restricts free speech and forgoes the money associated with it in favor of an unpopular political agenda is always in trouble and should be avoided from an investment standpoint. Something better than Twitter is just on the horizon, I'm sure.

On a related note, Burger King is now selling hot dogs in the American market. The point being, when a company is in trouble, it tends to show in an overt sort of way.

When GM stops producing trucks and decides to focus on producing leisure boats get the idea.

heresolong said...

Grey 8:27. How can you be cash flow positive and have to take on debt to avoid depleting your cash reserve? I'm no economist but this doesn't make sense to me from a common sense standpoint.

Unknown said...

Where is the cash? Is it in the US or is it OS? That may well explain why a cash rich company would borrow... can't bring reserves into the US without it being taxed into oblivion.

Pax Empyrean said...

"I don't even know how Twitter makes money. I know they must make money"

Now, they really don't. Last I saw was their report for 2014, during which they lost half a billion dollars.

Anonymous said...

"I guess we keep them around because if war comes, buying tanks from China is not an option."

Faulty reasoning since we don't buy tanks from them and they have no capacity to produce tanks. If we wanted to buy tanks from GM, they would essentially need to capitalize building a new factory. At the same cost as getting a basketball company to build a new factory.

... And we have a 100% surplus of new tanks right now, sitting in the California desert collecting dust.

We keep them around because they pay politicians large bribes (which we call campaign contributions so they aren't unethical).

Robert What? said...

Sounds reasonable. But it leads to the question: how and why is Farcebook making money? What is Twatter doing wrong that Farcebook is doing right? They're both run by SJWs.

Tucanae Services said...

Before I put money in any stock I try to determine if there are two positions in the firm --

1/ Diversity officer.
2/ Green Initiative officer.

I see either of those on a org chart I run like hell with my money in tow.