Elon Musk Announced Plans to Cut 75% of Twitter's Staff

While Elon Musk seems to change his mind about Twitter (NYSE: TWTR) on an almost weekly basis he is consistent on one key topic - downsizing. Musk recently announced plans to cut almost 75% of Twitter's employee base (amounting to roughly 5,600); a move will surely lead to internal turmoil.

Despite the back and forth that we have witnessed with Musk and Twitter over the last few months, he recently agreed, after a lawsuit from Twitter, to go through with the deal, at an eye-popping $44 billion. The take-private closed on October 28.

Even prior to Musk's revelations, Twitter was hyper-focus on roping in costs, with plans to cut the company's payroll by about $800 million by the end of next year -- a move that would mean ~25% of its employees would be let go. This was put on hold during Musk's ongoing attempt to acquire the company.

The news comes amid a broader downturn in the tech space. Facebook (NASDAQ: META), Amazon (NASDAQ: AMZN), Google (NASDAQ: GOOGL) have all announced plans to both freeze hiring and downsize teams, in an effort to reduce costs. Much of what we are witnessing in the tech space now is a trimming down of the "bloat" we saw during the peak of the pandemic. In a low interest rate environment, Company valuations jumped to record highs while cost of capital dropped. This resulted in a hiring spree across the industry and teams expanded.

While Twitter employees might need to dust off their resumes in the anticipation of being laid off, the likelihood of Musk following through on his word is highly unlikely. His plans to leave the company with a "skeleton staff" of just 2,000 employees would bring the Company to shambles - the very Company he is planning to acquire. History tells us that Musk is highly likely to increase the pace of lay-offs (which he as done at Tesla (NASDAQ: TSLA)) but firing 75% of the employee base is a whole other story.

His initial pitch deck in fact outlined plans to increase Twitter's headcount, Musk's initial plan was to hire 3,600 new employees and remove some existing employees with the goal of boosting Twitter's user base to over 931 million and quintupling revenue by 2028. In total, the deck included projections that Twitter will employee ~11,000 people by 2025 - an ~45% increase from the current headcount.

Now whether laying off 75% of Twitter's headcount is actually Musk's plan and whether it is achievable is a whole other story. If fact, the aggregate story seems to paint a drastically different picture. And with the rise of quiet quitting, productivity trackers, and strict cost cutting measures many companies are re-assessing their current employee base so this is not a one-off or isolated case, especially in today's struggling economy. This might not be reasonable (at least in the way companies approach right sizing) but it is not completely irrational. And if we have learned anything about Musk is that his actions often steer far from his word (and sometimes takes no action at all) - leaving us at the whim of his tweet tirades in predicting his next move.