Elon Musk’s ‘X’ endures $25 billion value drop-in just 1yr

The world’s richest man, Elon Musk has seen his social media company X internally value itself at $19 billion as of Monday, a $25 billion value drop from what Elon Musk paid ($44 billion) for the company in October 2022.

According to Bloomberg, based on restricted stock units awarded to employees, recent evaluations of the company place its worth at $19 billion, equating to $45 per share, signifying a 55% slump.

Since Musk’s takeover, substantial changes have taken place within the company. A significant portion of Twitter’s workforce has either been laid off or voluntarily resigned.

Furthermore, Musk rebranded the company as X and made alterations to some of its content regulations, resulting in the loss of more than half of its advertising revenue. Fortune initially reported this devaluation, citing an internal memo.

In the lead-up to Elon Musk’s acquisition of the company, he candidly expressed his belief that he was “clearly overpaying for Twitter at the time.” However, this sentiment was just the beginning of a series of intriguing developments surrounding the deal.

At a certain juncture, Musk made an attempt to renege on his agreement to purchase Twitter at a price of $54.20 per share, a commitment made in 2021.

His primary concern revolved around the pervasive issue of fake accounts, which prompted him to contemplate cancelling the acquisition. In response, Twitter initiated legal proceedings, ultimately resulting in a court order that compelled Musk to h the agreement. This prolonged saga finally reached its culmination in October 2022 when the acquisition was officially finalized.

Fast forward to April, during an interview with the conservative media personality Tucker Carlson, and Musk’s candor continued to shine. He openly admitted that the purchase did not align with a “financially prudent” decision at the time. Musk’s appraisal of the company’s value had substantially depreciated, amounting to approximately half of the acquisition cost.

Under Musk’s ownership, the company has faced financial challenges. At the time of acquisition, Twitter was valued at $44 billion, combining debt and equity. Musk’s acquisition burdened the company with a substantial $13 billion in debt.

Over time, his unpredictable decision-making and more relaxed content-safety guidelines have driven advertisers away, leading to a 60% decline in sales. Additionally, X is obligated to pay approximately $1.2 billion in interest on its debt annually, as earlier estimated by Bloomberg.

Musk’s strategic vision for X involves transitioning away from advertising and focusing on paid subscriptions. However, thus far, the company has managed to convince fewer than 1% of its users to subscribe to its monthly premium service, which translates to an annual revenue of less than $120 million, as estimated by Bloomberg.

Musk has also been vocal about transforming X into an “everything app” that could generate income through features such as shopping and payments. The company recently introduced audio and video calling, launched a beta version of a hiring service, and announced plans to introduce a news wire. Musk has informed employees of X’s intention to compete with giants like Google’s YouTube, Microsoft Corp.’s LinkedIn, and Cision’s PR Newswire.

During a meeting with bankers this month, Chief Executive Officer Linda Yaccarino unveiled the company’s financial plan, which included proposals for new products and services for X, such as the introduction of advertising tiers.