Elon Musk Bought X For $44B, Now Fidelity Values Social Media Network Below $10B

Fidelity was one of several companies that helped Elon Musk acquire social media platform X, formerly known as Twitter, back in 2022. The financial company may have lost money on their investment in the company according to recent valuation metrics, which show the $44 billion paid by Musk may have been too high.

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What Happened: Fidelity owns a stake in X in the Fidelity Blue Chip Growth Fund (FBGRX) and changes the valuation of the social media company periodically to reflect valuations based on financials and peer companies.

With X facing concerns over advertising revenue, the stake valuation has often been lowered, with some months showing a higher valuation from the mutual fund.

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The latest fund valuation shows the Fidelity Blue Chip Growth Fund having a stake in X worth $4.19 million as of the end of August, as reported by TechCrunch.

Fidelity valued the stake at $5.5 million at the end of July, marking another reduction in valuation for August.

For context, Fidelity initially invested $19.66 million in X through its mutual fund. Following the latest valuation cut, Fidelity now values its stake at 78.7% below the original investment.

With its latest valuation revision, Fidelity assigns a valuation of $9.4 billion. This marks a significant decline from Musk's $44 billion purchase price.

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Why It's Important: Musk has recognized that he likely overpaid for Twitter over the years, but he also has grand plans to turn the company into his vision of an everything app that will include social media connections, video, and financial payments.

After paying $44 billion for the company, Musk may have hurt the valuation by offering a lower price point on stock awards for employees.

Months later, Twitter was valued at $20 billion when stock awards for the company’s employees were announced in March 2023. While the valuation of the stock awards was less than half of the price Musk paid, the then-CEO said he was optimistic about the company.

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"I see a clear, but difficult, path to a <$250B valuation," Musk said at the time.

For Fidelity, the loss on the X investment may be minor, with the Fidelity Blue Chip Growth Fund mutual fund having a small stake in the company. The fund invests in private and public companies and is likely helped by the fact that the largest holdings in the fund are currently NVIDIA Corporation (13.4%), Apple (11.8%), Microsoft (8.2%), Amazon.com (8.1%) and Alphabet (6.1%).

Along with its stake in privately held X Holdings, the Fidelity Blue Chip Growth Fund also owns stakes in some of the most well-known private companies like SpaceX, Fanatics, Stripe, Epic Games, Redwood Materials, MOD Pizza and Relativity Space.

Ark Funds, which owns a stake in X Holdings via the Ark Venture Fund, has also often changed the valuation for its stake in the social media company.

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