Twitter is now worth 33% of what Elon Musk paid
What's the story
When Elon Musk spent $44 billion to acquire Twitter last October, many estimated that to be way too much money. Twitter's journey so far has justified that belief. Now, according to financial services giant Fidelity, the microblogging platform is only worth 33% of what Musk paid. What led to this major downturn in Twitter's valuation? Let's see.
Context
Why does this story matter?
Twitter's financial struggles since Musk's takeover are well documented. His dream of turning the platform into a $250 billion worth "everything app" hasn't had the best of starts. The Musk juggernaut that has reaped success at Tesla and SpaceX has failed to make an impact at Twitter. In fact, it seems to have had the opposite effect on it.
Valuation
Twitter is worth around $15 billion now
Per Fidelity's monthly disclosure of its holdings, its stake in X Holdings Corp. (formerly Twitter) is worth $6.55 million as of April 28. In the previous disclosure, it was valued at $7.8 million. Fidelity came up with Twitter's valuation based on a markdown of its own stake. According to the financial services giant, Twitter is now worth around $15 billion.
Musk
Musk himself valued Twitter at $20 billion in March
Musk himself has acknowledged he overpaid for Twitter. On Tesla's third-quarter earnings call last year, Musk said he and other investors overpaid for the platform. Later, in March this year, Musk offered Twitter employees stock grants in a memo. According to the Platformer's Zoe Schiffer, the stock grants were based on a $20 billion valuation. That is less than half of what Musk paid.
Advertisers
Twitter's advertising revenue is on a decline
What is causing the regular decline in Twitter's valuation? It starts with advertisers. The company's equation with some of its biggest advertisers turned sour after Musk's acquisition courtesy of poor content moderation policies. According to research firms Sensor Tower and Insider Intelligence, the ad spending of Twitter's top 50 advertisers is down 20% year-over-year. The forecast for this year is also not hopeful.
Twitter Blue
Twitter Blue is yet to hit the jackpot
Musk introduced a paid tier on Twitter called Twitter Blue to negate the effect of the ad revenue downturn. The company hoped Blue would be its redemption, but it has not shown any signs of that. According to research firm Similarweb, Twitter Blue is only moderately successful. Per Mashable, only about 619,858 users were subscribed to Twitter Blue by the end of April.
Effect
Musk's acquisition has amplified Twitter's existing problems
The downturn in advertising revenue and Twitter Blue's less-than-stellar start are pulling Twitter down. The company was never a revenue-generating machine. It was leaking money even before Musk. But some erratic decision-making by the billionaire and his posse has amplified Twitter's problems. What's next for Twitter? That's something we will have to wait and see.