X is now worth a third of Musk acquisition price after yet another Fidelity markdown

Fidelity Investments has made a significant downward adjustment in the value of its stake in X, the social media company formerly known as Twitter and now owned by Elon Musk. This adjustment comes more than a year after Musk’s high-profile acquisition of the company for $44 billion in October 2022. The latest valuation cut, reported by Axios, Bloomberg, and others, amounts to a staggering reduction of 71.5%, prompting questions about the financial health and strategic direction of X.

Fidelity’s decision to slash the valuation of its shares in the erstwhile Twitter is not an isolated incident. The latest markdown follows a previous 65% reduction in October and an additional 11% cut in November, emphasizing a consistent downward trend in the perceived value of Musk’s social media venture. The cumulative effect of these valuation adjustments places X at a notional value of just $12.5 billion, raising concerns about its economic viability. With the markdown, X has lost $2.85 billion of worth according to Fidelity.

One of the critical factors contributing to X’s precipitous valuation decline is the pronounced advertiser boycott. Major brands such as Apple, IBM, and Disney severed ties with the platform over concerns about lax content moderation and Musk’s unfiltered communication style. The financial repercussions of this advertiser exodus have been profound, with X estimated to garner only $2.5 billion in ad revenue for 2023 – a marked reduction from the previous rate of approximately $1 billion per quarter.

The turbulence surrounding X under Musk’s ownership has been marked by a series of significant challenges and controversies. The acquisition triggered a cascade of changes, including widespread layoffs, the shuttering of international offices, and substantial alterations to moderation policies and verification systems. These structural shifts, combined with a debt-fueled restructuring, have left X struggling to achieve financial stability as well. Fidelity’s repeated markdowns on X’s valuation bring attention to the disparities in how various stakeholders perceive the platform’s value. While Musk’s acquisition valued the company at $44 billion, internal stock plans for X assessed its worth at $19 billion in October – less than half of the purchase amount.

Elon Musk’s unconventional leadership style and controversial statements have further complicated X’s journey under his ownership. To date, the social media company has lost nearly 60% of its advertisers after the takeover by Musk in 2022. Furthermore, Musk’s endorsement of a controversial post in November, coupled with a rather bold statement at a New York Times conference where he declared that an advertiser boycott would “kill” the company, has drawn both attention and criticism. “If somebody is going to try to blackmail me with advertising? Blackmail me with money? Go f– yourself. Go. F–. Yourself,” Musk had said in an interview. These statements have not only impacted advertiser relationships but also added to the uncertainty surrounding X’s future.