Technology

ExTwitter Admits Elon Has Cut 56% Of The Value Of The Company; Fidelity Says It’s Actually Worth Even Less

Down, down, down, down, down.

By  
on

986715Back in March of this year, Elon Musk effectively admitted that he had set fire to more than half of Twitter’s value in telling employees that they’d be getting stock grants with the company valued around $20 billion. That’s a pretty steep discount from the $44 billion he paid for the company. Now, some would say it wasn’t actually worth $44 billion at the time (the stock before he bought in was valued around $33 billion), but valuation is based on the last price someone actually paid. Of course, even if we go with the $33 billion number, Musk admitting that it would only be valued at $20 billion so soon after taking the company over is kind of embarrassing.

Last week the company finally revealed its new employee equity compensation plan, which actually values the company at $19 billion, even below what Musk had suggested in March. That’s a 56% haircut in just one year. Of course, that fits with exactly how Musk has set the company’s business model on fire as well:

This new valuation comes a year after Musk purchased the platform for $44 billion, and recent reporting claims that the banks involved with financing the deal are still grappling with efforts to mitigate the adverse impact on their financial standings, expecting to lose roughly $2 billion, the Wall Street Journal reported. In July, Musk posted that X is “still negative cash flow” due to a “50% drop in advertising revenue plus heavy debt load.”

Of course, last month, we explained how there was a reasonable calculation to argue the company is worth closer to $8 billion than $19 billion. And… that may be a problem for the remaining employees that Musk is hoping to retain. If the stock grants are completely underwater and have no hope of ever being worth anything close to what they’re being granted at, why stick around?

And there is some evidence that outsiders view the company worth noticeably less. As has been chronicled quite a lot over the last year, the financial firms that stupidly ponied up the $13 billion to help Musk close the deal have been desperate to unload the loans from their books, and despite discounting them repeatedly, have been unable to find any suckers dumber than themselves to purchase the loans.

Right around the time that the story of the $19 billion internal valuation came out, it was also revealed that Fidelity has marked down the value of its own Twitter holdings by 65%, which is a significantly bigger haircut than what exTwitter is valuing itself at:

Mutual fund giant Fidelity wrote down the value of its shares in Twitter/X by another 8% during the month of September, according to a new disclosure.

…Fidelity, which contributed over $300 million to Elon Musk’s $44 billion takeover, decreased the value of its investment by nearly 65% over the first eleven months.

Sponsored

That would put the valuation around $15 billion. And Fidelity has actually been more bullish on the value of exTwitter than the other banks. As Axios reported, over the summer, Fidelity actually bumped up the value of its exTwitter shares, as it seemed hopeful that Linda Yaccarino would bring some measure of fiscal responsibility to the company. Apparently, someone at Fidelity began to realize that wasn’t… uh… working out too well.

ExTwitter Admits Elon Has Cut 56% Of The Value Of The Company; Fidelity Says It’s Actually Worth Even Less

More Law-Related Stories From Techdirt:

Just Because CSLI Warrants Are New-Ish Doesn’t Mean You Can You Can Skimp On The Probable Cause
Court Rejects Extremely Broad Google Search Warrant, Citing Both Carpenter And Riley
Survey: Americans Still Not Sure Where To Set Limits In Their On-Again, Off-Again Relationship With The Government

Sponsored

CRM Banner

Topics

, ,