Twitter worth only 33% of what Elon Musk paid. Here’s what went wrong

In October 2022, Elon Musk purchased Twitter for the eye-watering sum of $44 billion. Musk at the time described Twitter as an asset that had “languished” for a long time. Musk said that though he and other investors were ‘obviously overpaying’ for Twitter, its long-term potential was ‘an order of magnitude greater’ than its current value. Musk recently estimated that the social media giant is worth ‘about half of what he paid for it’, telling employees in an email the company is an ‘inverse start-up’. But financial services company Fidelity says even that valuation is far too high. The firm is estimating that the social media company’s value is only around 33 per cent of what Musk paid for it – around $14 billion. But what happened? And why has Fidelity marked the value of Twitter down? Let’s take a closer look: What happened? According to Axios, Fidelity was among the investment firms that aided Musk’s takeover bid. Fidelity has made its determination based on a markdown of its own stake in the company.

According to Bloomberg, it remains unclear how Fidelity arrived at its new, lower valuation.

According to Fast Company, Fidelity, whose open-end mutual funds are purchased and sold by investors at prices based on the funds’ net asset value, is legally required to assign a market value (rather than a purchase cost) to the funds’ stakes in X Holdings. A monthly disclosure by the investment firm showed on Sunday that it marked down the value of its stake in Twitter for the third time since Musk’s takeover of the social media platform in October, The Fidelity Blue Chip Growth Fund reported that its stake in Twitter, which now exists under Musk’s X Holdings Corp, was valued at nearly $6.55 million as of 27 April, compared with $7.8 million as of 31 Jan and almost $8.63 million at November-end. What does this mean? We don’t know – yet. Axios’ Dan Primack noted that though Fidelity has yet again reduced the value of the company, this is on a one-month lag. “The interesting question is what Fidelity does for the month of May, when Musk announced that Linda Yaccarino would be the platform’s new CEO. We won’t get those marks until the end of June,” Primack noted. [caption id=“attachment_12587452” align=“alignnone” width=“640”] Linda Yaccarino will take over as Twitter’s new CEO. AFP[/caption] The Fast Company piece noted, “This is a cautionary—and hilarious—story about how smart, big-time investors, who think they’re getting in on the ground floor with a legendary investor, have found their investment heading toward the basement instead of the sky.”

What we do know is that Twitter has struggled mightily since Musk took the helm.

While Musk in April claimed advertisers were returning to the social media platform, statements from several companies and data from research firms suggest a bounce-back is not happening so fast. However, several companies, including snack maker Mondelez International (MDLZ.O), consumer products company Unilever (ULVR.L), and Coca-Cola (KO.N), that had been among Twitter’s top 10 advertisers before Musk took over, are no longer even in the top 50 advertisers in the past two months, according to data compiled by Sensor Tower. The top 50 advertisers on Twitter spent a combined $83 million over the past two months, down from $102 million in the same period last year, according to Sensor Tower, a market intelligence firm. Research firm Insider Intelligence in April slashed its forecast for Twitter’s global ad revenue this year by 37 per cent to $2.98 billion. That would represent a 28 per cent decline from Twitter’s 2022 ad revenue of $4.14 billion. Since acquiring Twitter, Musk has ordered a series of rapid changes that have rattled advertisers, including laying off thousands of employees to cut costs and rushing the launch of a subscription to let users pay to have their profiles verified. His controversial tweets, including ones that linked to conspiracy theories or waded into debates about racism, have also given advertisers pause. “Many advertisers don’t trust him based on past behaviour or don’t want to be associated with him,” Insider Intelligence principal analyst Jasmine Enberg said of Musk. In March, the Wall Street Journal, citing people in the know, reported that Twitter reported a drop of about 40 per cent year-over-year in both revenue and adjusted earnings for the month of December The report comes after several advertisers slashed their spending on the social-media platform after Musk took charge of the company resulting in a 71 per cent drop in advertising spend on Twitter during December, data from advertising research firm—Standard Media Index showed. According to Fortune, Musk’s attempts to replace advertiser revenue with Twitter Blue subscriptions have failed.

Fewer than 1 per cent of Titter users had signed up for Twitter blue by March end.

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Musk earlier in May named former NBCUniversal advertising chief Linda Yaccarino as Twitter’s new CEO as the company struggles to reverse a slump in advertising revenue and navigate an overhaul that included mass layoffs. Musk, who warned in November about the possibility of the Twitter going bankrupt, said in December that the company was on track to be “roughly cash flow break-even” in 2023. Twitter made its first interest payment in January on a loan that banks provided to help finance billionaire Musk’s purchase of the social media company last year. With inputs from agencies Read all the  Latest News,  Trending News,  Cricket News,  Bollywood News, India News and  Entertainment News here. Follow us on  Facebook,  Twitter and  Instagram.