Introduction: In a bold move just a month ago, the ever-independent Elon Musk sent advertisers on X packing, responding defiantly to investor and advertiser pressures concerning anti-Semitic messages the magnate had endorsed on his X profile with a resounding “screw you.”
Surprisingly, Musk’s owner-endorsed insult did little to appease those who needed to invest their money in the social media platform, formerly known as Twitter, to halt its year-long plummet in revenues. Fidelity Investments, a major creditor of X, had lent $300 million to Elon Musk to facilitate part of the $44 billion cash payment for the Twitter acquisition. Now, Fidelity has appraised the company at a staggering 71.5% less than its value when Elon Musk acquired it, as reported by Reuters.
Factors Affecting X’s Valuation: As X is not a publicly traded company, its valuation is not determined by stock prices but relies on other estimations, such as profitability and customer interest in its products and services. The recent decline in advertising investments has caused the company’s valuations to decrease since Fidelity’s last appraisal in October, where the investment firm valued X at 65% of its purchase value.
Investments in X plummet, but Musk remains unyielding. This marks a 6.5% decrease since Musk openly insulted his investors, stating, “If someone wants to blackmail me with advertising or money, screw them,” and reiterated his stand, making it abundantly clear he wouldn’t succumb to accusations of anti-Semitism.
Fidelity’s Revised Valuation: The Fidelity appraisal suggests that investors now believe the social media platform is currently valued at $12.54 billion, a more optimistic scenario than the one presented by Bloomberg analysts before the October 2023 investor meeting. Back then, the U.S. media outlet estimated X’s value had fallen by around 90% from its purchase price a year earlier.
Elon Musk himself revealed the decline in the social network’s value from his profile, estimating a 60% drop in advertisers due to the platform’s fluctuations. After expressing his explicit opinions about investors, The New York Times assessed the potential impact of the billionaire’s words on the company’s valuation, estimating an additional loss of $75 million. The losses continued to accumulate.
Challenges for X’s CEO: Linda Yaccarino, X’s CEO, faced a challenging task in October, convincing creditors of the $13 billion in cash that Elon Musk needed to acquire X that the company could handle its debts. However, the social network’s owner made it challenging to maintain financial credibility with constant attacks on investors.
The decline in X’s valuation should not be generalized as a broader trend of investment loss, as other social networks have absorbed investments that fled from X. Meta, extending its response to X by launching Threads in Europe and Spain, saw a 4.9% increase in its shares in November, while Snap’s shares rose by 38.2% during the same month.