When Elon Musk bought Twitter for $54.20/share last October, it was widely acknowledged that he overpaid. Unfortunately for Musk, he’d locked in his bid just before the tech crash, which sent Twitter stock spiraling downwards. He famously tried to weasel out of the deal but the courts were having none of it and he ultimately was forced to follow through.
Since then he’s laid off 75% of the staff and advertisers have fled like spooked birds. Even Musk admits that he overpaid, which implies Twitter is worth less now than it was a year ago. But how much? 20%? 30%?
Try 67%.
And that’s based on math from some of the best financial minds in the world.
The numbers certainly aren’t coming from Musk or from his cronies. Twitter is now private and is under no obligation to report its profit and loss figures. And certainly Musk’s friends who he convinced to invest – Larry Ellison, Mark Andreesen, Prince al Waleed, etc. – aren’t talking.
But One Investor MUST Talk
If Larry Ellison wants to squander his billions on a dying social media brand and not tell anyone about it, that’s perfectly within his rights. But when a company takes the public’s money, it owes the public an accounting of what it’s doing with the money.
Fidelity, the largest asset manager in the US, owns a stake in Twitter its behemoth $100bn Contrafund mutual fund. This mutual fund publishes is holdings every month and is obliged to fairly state them. if it holds shares of Coca-Cola or Apple, it can simply look at the market price and use that number. But if it’s invested in something that isn’t a publicly-traded security, it sets its accountants and analysts to work researching and evaluating the numbers.
Last October, Contrafund reported its Twitter stake at $53.5 million, which is based on the $54.20 share price that Musk paid for Twitter.
Almost immediately, the value of this holding was being marked down like Christmas cards in January.
- November 2022: investment reappraised at $23.5 million, a 56% drop.
- March 2023: $19.5 million, a 64% drop from purchase price
And most recently in May 2023, Fidelity marked the stake as only worth $17.65 million. That’s 67% of the original purchase price.
Do the Math
Keep in mind these numbers aren’t hopeful numbers or speculations by some executive. They’re numbers that Fidelity could potentially have to defend in court or to the government if they’re questioned.
Also, Fidelity has every motivation to make them appear as rosy as possible. They’re always going to use the most positive assumptions beneficial accounting treatments they can. So if they’re discounting it 67%, that’s the best case scenario
Taking this analysis and applying it to Musk’s entire investment, he paid $44 billion for something that is now worth $14.5 billion less than a year later.
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The thing is, you’re referring to the on-paper value of the company, not the “real” value. The value of Twitter hasn’t gone down since he purchased, rather it’s been corrected to show the actual value of the company even before his purchase. So really what you’ve demonstrated is much more about the massive amount he overpaid, rather than how much the value has changed. The stockholders made out like bandits! Musk saved Twitter from a massive crash/implosion which was going to happen at some point, and probably would have driven the stock price lower even than it is now. Do I think Twitter is a good investment value? LOL not a chance, now or before, but it’s no less of a real value than it was before the changeover.
Since he bought it, Twitter’s value hasn’t gone down; rather, it’s been adjusted to reflect what it was really worth even before he bought it. What you’ve shown, then, has more to do with the enormous sum he overpaid than with any changes in value. Those who invested greatly benefited. Eventually, Twitter was going to fall or implode, and the stock price would have dropped even further if it hadn’t been for Musk’s intervention.
Your comment seems like an AI rewrite of mine? XD