Before Musk's Outburst At Twitter Advertisers, Fidelity Had Taken A Swipe At Valuation

Elon Musk, the world’s richest person, completed an acquisition of Twitter for $44 billion. One of his backers has now lowered the carrying valuation of the social media platform to well below its price tag.

What Happened: Fidelity Investments kept its stake in Twitter, now doing business as X, ever since the deal closed in November 2022. It currently holds a position in the company as part of the Fidelity Blue Chip Growth Fund mutual fund, which is traded as FBGRX.

Fidelity previously marked its valuation of Twitter at a discount earlier this year. It raised the valuation in June, July, and August.

A new monthly disclosure report from Fidelity shows the valuation of its Twitter stake at $6,267,608 — representing around 0.01% of the fund's assets.

The latest valuation for October represents a discount of 68.1% from the original purchase price by Musk, as shared by Dan Primack.

"This also means Fidelity is marking the equity below where Twitter stock was trading in public markets before Musk began talking about a takeover," Primack added.

Primack also tweeted that Twitter investor Baron Funds has written down the value of its investment in the social media company by 26% through the end of September. The writedown is smaller than what Fidelity has done, but adds to the list of investors who have lowered their valuation of Twitter.

Why It's Important: The Fidelity Blue Chip Growth Fund owns stakes in public companies, with the top ten holdings all publicly traded and top holding Microsoft representing 9.8% of asset

The mutual fund also owns stakes in some of the most well-known private companies like Twitter, SpaceX, Fanatics, Stripe, Reddit, Epic Games, Redwood Materials and more.

Musk helped fund a portion of the Twitter purchase by selling a portion of his shares in Tesla Inc TSLA. Some experts said the overhand hurt shares of the electric vehicle company.

Tesla is the thirteenth largest position in the fund valued at $743.9 million, representing 1.67% of assets. Privately traded SpaceX, another Musk-owned company, is represented with 0.54% of assets and valued at $239.9 million.

Musk previously said that "Fidelity will make a great return in the end" on their stake in Twitter. The owner of the social media platform previously said that Twitter could be valued at $250 billion or more in the future with the potential for the company to go public again.

Over the recent month, Twitter has been met with challenges related to advertising stemming from an antisemitic post that Musk interacted with and elevated on the platform.

Musk since apologized for the interaction, but told advertisers who have suspended ads on Twitter and are potentially blackmailing him "go f*** yourself."

The comments have sparked backlash and could lead to more advertisers pulling spending on the platform or make their current decision to stop spending last longer.

Reports say Twitter could lose over $75 million from the suspensions of advertising on Twitter by major companies and it could hurt the company's cash flow and potential profitability.

Musk hinted that the decision by some to pause advertising could "kill the company."

It will be interesting to see if Fidelity and others discount their Twitter valuation more in future months given the impact of the advertising bans and Musk's comments on the company's financial struggles.

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