Fidelity Slashes Valuation of X
Fidelity Slashes Valuation of X (Formerly Twitter)
Fidelity Investments recently made headlines with its stark reassessment of X’s (formerly Twitter) value.
This news has sent ripples through the tech world, raising questions about the platform’s future and the impact on its users and partners.
Fidelity’s Drastic Downgrade
According to Fidelity’s Blue Chip Growth Fund report, X is now worth a mere fraction of what Elon Musk paid for it in 2022.
Their assessment puts the current value at a staggering 78.7% lower than the original $44 billion purchase price, landing it at approximately $9.4 billion. This dramatic markdown reflects a significant loss of confidence in the platform’s financial prospects.
Why the Valuation Change?
There are several factors which have likely contribute to this dramatic devaluation, including:
- Musk’s controversial leadership, including mass layoffs and drastic policy changes, has led to advertiser exodus and user uncertainty.
- Increased competition from platforms like Threads and Mastodon further erodes X’s market share.
- Concerns about content moderation, misinformation, and brand safety have plagued the platform, making it less attractive to both users and advertisers.
Impact on X
The devaluation of X impacts the company’s ability to secure future funding and potentially limits its capacity for innovation and growth.
In addition, employee morale and talent retention may also suffer as a result of the diminished perceived value of stock options and the company’s overall financial health.
If it were almost any other company, we would be looking and potential acquisition or take-over scenarios. However, the likelihood of X being acquired or changing ownership in the near future is low. This is because X is privately held with Elon Musk as the dominant shareholder (estimated 70-75%), and it provides him a powerful platform and a key part of his personal vision and brand.
We do not expect to see any change of ownership or change of vision or operating model, as long as Musk is willing to fund it and his vision.
Effects Across the Market
Fidelity’s assessment sends a strong signal to the market about the perceived instability and risk associated with X. This could influence investor sentiment towards other social media companies and even the tech sector.
In addition, some of X’s partners, including advertisers and content creators, will take this opportunity to re-evaluate their relationships with the platform, potentially seeking alternative avenues to reach their target audiences.
Bottom Line
Musk’s vision for an “everything app” is ambitious (similar to WeChat in China) and will face more challenges given the platform’s current valuation.
Its current valuation challenges raise significant questions about its ability to maintain its partners/advertisers, particularly with increased competition from Threads, TikTok, Instagram and Bluesky Social.
X isn’t going anywhere; and its not going anywhere, else.
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