Twitter’s Market Value Plummets

In a stunning turn of events, Twitter’s market value has dwindled to just one-third of the price Elon Musk and his group of investors paid for the social media platform last year. Fidelity, a prominent financial institution, estimates that Twitter’s current valuation stands at approximately $15 billion, a stark contrast to the $44 billion Musk and his co-investors shelled out to acquire the company.

Musk himself contributed a staggering $25 billion to the acquisition, securing an estimated 79% stake in Twitter. The deal, finalized in October, involved $33.5 billion in equity and additional debt financing to convert Twitter into a privately held company. However, Musk has openly acknowledged that the purchase price was excessive, highlighting the significant decline in Twitter’s market value.

The latest estimate of Twitter’s valuation comes from a financial disclosure filed by the Fidelity Blue Chip Growth Fund for the month of April. Bloomberg initially reported the filing, revealing the successive markdowns Fidelity has applied to its stake in Twitter. The company had previously reduced the value of its stake by 56% in November 2022, followed by additional cuts of 9.6% in December and 7.9% in February, culminating in the current markdown.

Since assuming control of Twitter, Elon Musk has implemented substantial cost-cutting measures, including significant layoffs. Shortly after the deal was finalized, Musk announced that approximately half of the company’s 7,500-person workforce would be affected. He justified the layoffs as a necessary step to prevent the platform from succumbing to bankruptcy, as Twitter was reportedly losing around $4 million per day.

In an effort to boost morale and retain key employees, Musk offered Twitter staff stock option grants in March. However, these grants valued the company at approximately $20 billion, less than half of the original purchase price, as reported by The Wall Street Journal.

In an email to employees, Musk expressed his belief in Twitter’s potential, stating, “I see a clear, but difficult, path to a >$250B valuation.” He further projected that Twitter may break even in the second quarter of 2023 and even has a chance of achieving positive cash flow in the next quarter. However, Musk cautiously refrained from counting his chickens before they hatched, aware of the challenges lying ahead.

The substantial decline in Twitter’s market value raises questions about the company’s future prospects and underscores the challenges faced by its new leadership under Elon Musk. With Twitter’s valuation now a fraction of its purchase price, the platform’s ability to regain its former prominence in the competitive social media landscape remains uncertain. Investors and industry observers will closely monitor Twitter’s performance in the coming months to assess whether it can rebound and fulfill Musk’s ambitious vision for the company.