As a result of Elon Musk’s acquisition, the well-known social media platform Twitter has seen a significant drop in value.
Fidelity, a well-known financial services company, has marked down its equity stake in Twitter.
This shows that the company is now worth $15 billion, which is only one-third of what Musk paid for it. This makes people wonder if Musk got paid too much and if the platform was having trouble making money while he was in charge.
Musk, who is known for his work in the tech and auto fields, had already admitted that he had paid too much.
Musk said during Tesla’s earnings call in October of last year, “It’s clear that I and the other investors are overpaying for Twitter right now. However, I think Twitter’s long-term potential is a thousand times greater than its current value.”
The social media giant was bought by Musk for a staggering $44 billion, of which $33.5 billion was in stock. Musk has recently said that the value of the company is even less than half of what he paid for it.
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Fidelity’s lower valuation of Twitter’s stock
The fact that Fidelity marked down its valuation of Twitter’s stock has made people worry even more about the platform’s financial situation. This is the third time the company has marked down the social media site since Musk took over on Oct. 8.
In November, Fidelity first lowered the value of its stake to 44% of the buying price. After that, there were more markdowns, which were written about in the report.
As of the end of April, Fidelity’s stake in the platform, which Musk’s X Holdings now owns, was worth nearly $6.55 million, compared to $7.8 million as of January 31 and almost $8.63 million as of the end of November.
While Fidelity has been progressively reducing the value of its stake since November, the specific reasons behind these markdowns have not been disclosed by the company. It is still unclear if Twitter gives Fidelity any information not available to the public that affects its new value.
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Twitter’s revenue decline and financial difficulties
Since Musk took over Twitter, the site has had a lot of trouble making money. Musk’s way of making decisions and problems with content moderation have led to a drop in advertising income. Musk himself admitted a staggering 50% drop in advertising income in November 2022.
In a tweet, he said, “Twitter hasn’t changed how it moderates content.” He also said that the company had done everything it could to make campaigners happy.
Reports say that about half of Twitter’s workers have been fired since he took over on Oct. 28. This was because, as Musk tweeted, the company was losing more than $4 million a day.
Musk created the Twitter Blue premium service to try to stop this drop. But not many people have signed up for the service so far less than 1% of monthly users had done so by the end of March.
The social media giant is also struggling financially because it has a lot of debt to pay off. Musk put about $13 billion in debt on the company, which made its finances even worse. Because of all of these things, people are worried about the platform’s future and ability to keep going.
The Billionaires Index says that Elon Musk’s investment in Twitter is worth $8.8 billion right now, based on Fidelity’s valuation of his interests. Musk spent over $25 billion last year to buy about 79 percent of the company.
According to the index, Musk’s net worth dropped by $850 million to $187 billion after the markdown. Even though Twitter has had some problems, Musk’s general wealth has grown by more than $48 billion this year. This is mostly because the share price of Tesla Inc. has gone up by 63 percent.