Elon Musk’s X Suffers Massive Valuation Drop, Worth 80% Less Since Acquisition
Elon Musk’s rebranded social media platform, X, formerly known as Twitter, has seen a dramatic decline in its valuation, estimated to be nearly 80% less than the $44 billion he paid for it just two years ago. According to investment firm Fidelity, which manages the Blue Chip Growth Fund, the current estimated worth of X is approximately $9.4 billion, a staggering drop from its original valuation of $19.66 million when Musk took the company private in October 2022.
Fidelity’s Estimates Indicate Ongoing Struggles
As of the end of August, Fidelity reported that its shares of X were valued at just $4.2 million, marking a substantial 24% decrease in value from the previous month. This reflects the ongoing financial difficulties the platform has encountered since Musk’s acquisition. With X no longer trading publicly, Fidelity’s assessments serve as a critical indicator of the company’s financial status. Analysts believe the steep decline in valuation is largely attributable to a significant contraction in advertising revenue and the brand’s struggle with content moderation.
The Downward Trend in Ad Revenue
The pressure on advertising has been particularly pronounced since Musk took over. Many advertisers are increasingly uneasy about X’s association with extreme content. A global survey conducted by Kantar revealed that 26% of marketers plan to reduce their advertising spending on X in the upcoming year, which marks the most significant retreat from any major advertising platform. Alarmingly, only 4% of advertisers perceive X’s ad placements as offering “brand safety,” a stark contrast to 39% for Google.
In 2022, Musk faced backlash from major brands after endorsing an antisemitic conspiracy theory popularized by white supremacists. Although he later apologized, he infamously told departing advertisers to “go f**k yourself,” a statement that likely exacerbated concerns among potential advertisers.
User Engagement vs. Advertiser Concerns
Despite the challenges in the advertising sector, X remains a significant entity in the social media landscape. The platform reported 570 million monthly active users as of the second quarter, representing a 6% increase from the previous year. However, data from research firm Similarweb indicates a troubling decline in user engagement. In August, X had around 73.5 million monthly active users on iOS and Android in the U.S., down nearly 11% year-over-year and showing a 20% decrease since Musk’s takeover.
Interestingly, while U.S. web traffic has dropped, Similarweb noted that X has experienced stronger traffic figures outside the United States. This asymmetry highlights how the brand’s international presence may provide a different narrative around its value.
Contrasting Opinions on X’s Valuation and Future Potential
Some experts argue that Fidelity’s estimates may be overly pessimistic. Gene Munster, managing partner at Deepwater Asset Management, believes that the platform’s actual worth is not as diminished as Fidelity suggests. Munster asserts that in the long term, X and the data it holds could ultimately be worth more than the original acquisition price. “If you want a real-time understanding of what people are thinking, Twitter is the best source of that,” he remarked, emphasizing the unique value of the data collected by X.
Munster further noted that X’s data has played a crucial role in training Grok, the AI chatbot developed by xAI, Musk’s emerging AI venture. He posits that this connection could yield substantial financial returns for Musk, implying that while X’s immediate valuation may seem low, the potential for future growth remains significant. “Musk buying Twitter is a case of better lucky than smart,” he concluded.
Conclusion: A Complicated Future for X
Elon Musk’s X is undoubtedly facing significant challenges, as evidenced by recent valuation estimates and advertising pressures. However, the platform’s inherent value, driven by user engagement and data capabilities, suggests that there may still be room for recovery and growth in the long term. Whether Musk can navigate these turbulent waters and restore investor confidence remains to be seen.
As the landscape of social media continues to evolve, the ongoing story of X will likely serve as a critical case study for the intersection of technology, finance, and user behavior in the coming years.