Elon Musk’s X gets devalued again by Fidelity, now worth $12-14 bn as ad sales fall below expectation

Elon Musk’s social media venture, X, has experienced a significant decline in value, now standing at less than a third of the price paid by the billionaire for the former Twitter Inc., as reported by Axios citing disclosures from Fidelity.

Fidelity, which facilitated Musk’s $44 billion purchase has reduced the valuation of its holding in X by an additional 11 per cent at the end of November, based on the latest portfolio update for its Blue Chip Growth Fund.

This marks a continuation of a series of markdowns as Fidelity assesses the value of the ad-funded platform that faced challenges attracting advertisers in 2023.

According to Fidelity’s disclosure through the end of November 2023, the firm believes X is worth 71.5 per cent less than the purchase price of $44 billion, suggesting a valuation at about $12 billion. Others, have put the current valuation at about $14 billion.

This includes a 10.7 per cent reduction in November, a period during which Musk’s controversial statements escalated, including telling boycotting X advertisers to “go f**k yourself” during an interview with the New York Times.

In comparison to publicly traded competitors, Meta stock rose 4.9 per cent in November, while Snap shares surged by 38.2 per cent.

Fidelity began marking down its Twitter shares the month following Musk’s acquisition, and although it adjusted share values in earlier months of 2023, it now indicates a significant devaluation.

It’s important to note that Fidelity’s valuation doesn’t necessarily reflect inside information on X’s financial performance, as the firm, like other shareholders, may value their X stock differently.

However, X is facing some major challenges as far as ad sales and other revenue streams are concerned. The platform’s annual revenue from ad sales is expected to stand at $2.5 billion for 2023, as opposed to $1 billion each quarter that CEO Linda Yaccarino and Elon Mush had hoped for.

Musk’s acquisition of Twitter in late October 2022 triggered a series of rapid changes, including layoffs, office closures, and alterations to moderation policies and verification systems.

This upheaval led to a decline in advertiser interest, with estimated 2023 ad revenue at $2.5 billion, significantly below the previous quarterly rate of approximately $1 billion, according to Bloomberg News.

In November, Musk faced further controversy by going off on advertisers who abandoned X over his endorsement of an antisemitic post. Musk’s agreement with a post implying a “dialectical hatred” held by Jewish people toward White people drew criticism from the White House and Tesla investors, leading major corporate spenders like Walt Disney Co. and Apple Inc. to distance themselves from the platform, who, along with other advertisers decided to stop advertising on the platform.

(With inputs from agencies)