In every recession, cash is king because credit is reduced and has gone up in price or interest rates are higher than normal. Companies have the same concern as individuals, if cash is king, debt needs to be low or eliminated. If one of your investments has higher than expected debt, expect asset sales or changes in management strategic plans.

One company which has constantly made the news is Twitter and in an article from Reuters, Elon Musk said Twitter is on track to be roughly cash flow even next year.

Before Mr. Musk bought Twitter, the company was going to lose $3 billion, but with the cuts he has made the workplace now has 2,000 employees. Roughly 50% of the workers were let go.

Twitter was on track to spend $5 billion in 2023. In addition, with $12.5 billion in debt due to the acquisition, Twitter has faced a net cash outflow of $6.5 billion with revenue of $3 billion.

Mr, Musk said in a Twitter Spaces interview, his number one priority was to grow subscriber revenue. Twitter’s major advertiser will be watching closely as they have told Mr. Musk Twitter ads have the lowest return on investment out of all the social media platforms.

Linking to dividend paying stocks, sometimes debt is good, sometimes debt is not good and Wall Street analysts will penalize the company for having too much debt. Mr. Musk bought Twitter for many reasons but if the return on investment for the advertiser does not improve, they will move funds to other social media platforms. It used to be advertisers were loyal to the advertising venue or newspaper, but those days are long gone. If the revenue streams are not enhanced, Mr. Musk will wonder even more why he bought Twitter. For this kind of stock, it is better to watch from the sidelines than risk money.

There are more questions than answers, till the next time – to raising questions.