Social media platform Twitter was among the biggest storylines of 2022 with Tesla CEO Elon Musk spending $44 billion to acquire the company. The valuation of Twitter has been lowered by one of the investors in the deal.
What Happened: Musk spent $44 billion in the acquisition of Twitter, a transaction from which he almost withdrew. The prospect of a legal fight emerged as a major subplot before he finally consented to purchase the company at the initially agreed price.
While Musk has acknowledged that he overpaid for Twitter, he remains confident in his ability to turn the company profitable by capitalizing on user engagement.
To get the acquisition done, Musk sold shares of Tesla to help finance the purchase and also had other investors back the deal.
Among the investors who backed Musk's acquisition of Twitter was Fidelity, a leading financial services company.
Fidelity recently cut its valuation of its stake in Twitter. The Fidelity Blue Chip Growth Fund has a $6.6 million stake in Twitter, according to a recent disclosure. This marks a decline from a recognized value of $19.7 million at the end of October, as reported by the Wall Street Journal.
Based on the stake, Fidelity values Twitter at $15 billion, or around a third of what the company sold for to Musk and investors.
Fidelity has now cut the value of its stake in Twitter four times since the deal was finalized, with changes in November, December, February and May.
Musk sought to raise funds in December 2022, aiming for a valuation of $44 billion, which matches the purchase price he paid for the company.
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.
“I see a clear, but difficult, path to a <$250B valuation,” Musk said at the time.
Related Link: Musk Back On Top, Tesla And Twitter CEO Overtakes Arnault As World's Richest Person, But Just Barely
Why It’s Important: Since the Twitter acquisition closed, Musk instituted several changes to the social media platform. Those changes have seen mixed results from users, including the usage of a subscription service for verified blue checkmarks.
A Twitter Spaces held with presidential candidate Ron DeSantis was met with technical difficulties that may have hurt the future growth of the platform. Twitter could also remain a key part of the 2024 election, providing a way for leading candidates to share policies and ideals.
According to the report, Twitter has battled with advertisers and news organizations since Musk’s takeover.
After initially assuming the role of CEO, Musk has now appointed Linda Yaccarino as the CEO of Twitter.
The Ark Venture Fund, led by Ark Funds and Cathie Wood, is also a holder of Twitter shares and provides investors a chance to invest in the future growth of the now-private company.
Benzinga previously wrote that Twitter made up 12% of the assets in the Ark Venture Fund, tied for the largest position. At the time of writing, Twitter represents 3.5% of the fund’s assets, but it is unknown if Ark cut the valuation or increased positions in other stakes.
Photo: Daniel Oberhaus on Wikimedia Commons.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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