The high-profile buyout of Twitter, now rebranded as X, led by Elon Musk, which involved a group of 19 investors, has reportedly resulted in a massive $17 billion loss.
What Happened: Musk and his co-investors, including the Andreessen-Horowitz VC fund, Oracle founder Larry Ellison, Sequoia Capital, and Ron Baron, pooled together $7.1 billion to acquire Twitter shares, reported Fast Company.
Other notable players, such as Fidelity and Saudi Arabia's sovereign wealth fund, traded their Twitter stakes for shares in "X," the entity used for the takeover.
The investment has soured a year post-acquisition, with investors seeing their stakes depreciate by about $4.6 billion. Banks that lent $13 billion to "X" for the Twitter acquisition have lost approximately $2 billion as the loans remain unsold at face value.
Fidelity, who traded $316 million worth of Twitter stock for "X" shares, has seen its valuation drop by 64.7% since the swap. This plunge has resulted in the cumulative loss surpassing $17 billion for Musk and his fellow investors.
Despite the considerable loss, Musk reportedly issued restricted stock units to certain employees, implying a valuation of $19 billion for X.
Neither Musk nor the company have clarified whether this valuation exceeds X’s $13 billion debt, the report noted.
Why It Matters: The investment group’s substantial loss follows a tumultuous year for X, formerly Twitter, under Musk’s leadership.
It was previously reported that the drop in the company’s valuation, which went below 50%, was primarily because of the leadership chaos and advertiser concerns about content safety rules on the platform.
It is worth noting that following Musk's acquisition of Twitter for $44 billion in October last year, X underwent significant changes, including a shift in content rules and substantial layoffs.
Moreover, the tech billionaire's plans for X include transitioning away from advertising and toward paid subscriptions. While the vision is grand, the execution has faced challenges.
Currently, less than 1% of users have reportedly opted for the monthly premium service, generating less than $120 million annually for X.
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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