Elon Musk’s X Now Valued at $19 Billion, Less Than Half of Acquisition Price
X, formerly known as Twitter, has seen its value decline significantly, falling to $19 billion, which is less than half of the $44 billion Elon Musk paid for the platform just a year ago. The drop in value is attributed to a range of factors, including changes in content rules, layoffs, and declining advertising revenue.
The $19 billion valuation is based on restricted stock units granted to X employees, with each share priced at $45. In stark contrast, Elon Musk acquired Twitter for $44 billion a year ago. However, since the acquisition, X, under Musk’s leadership, has undergone significant changes that have impacted its financial performance.
Following the takeover, a substantial number of Twitter’s employees either resigned or were laid off. Musk rebranded the platform as X and introduced alterations to its content policies, which, in turn, led to a significant drop in advertising revenue.
The financial struggles faced by the company under Musk’s ownership are notable. At the time of acquisition, Twitter was valued at $44 billion, factoring in both debt and equity. Musk’s purchase introduced a debt of $13 billion to the company, and subsequent erratic decision-making and relaxed content-safety rules have contributed to a 60% decline in sales. Additionally, X is now tasked with making approximately $1.2 billion in annual interest payments on its debt.
Musk’s vision for X involves a shift from advertising to a subscription-based model. However, the company has struggled to persuade more than 1% of its users to sign up for the monthly premium service, resulting in annual revenues estimated at less than $120 million.
Furthermore, Musk has expressed his intention to transform X into an “everything app” capable of generating revenue from various features, including e-commerce and payments. Recent developments include the introduction of audio and video calling, a beta version of a job-hiring service, and plans to launch a news wire. Musk has also indicated a desire to compete with platforms like Google’s YouTube, Microsoft’s LinkedIn, and Cision’s PR Newswire.
Linda Yaccarino, X’s Chief Executive Officer, has met with bankers to outline the company’s financial plan, which includes the introduction of new products and services and the launch of advertising tiers. While Musk has previously hinted at the possibility of taking X public, the significant drop in the company’s value may pose challenges to such plans.
In the details of the new stock grants, X specified that equity would be offered at $45 per share in the form of restricted stock units, which employees can earn over time. Furthermore, the company stated that employees would still be paid in cash at a rate of $54.20 for any outstanding shares granted to them under previous management.
The reason behind the discrepancy between the share price and the company’s valuation is unclear, although X may have made adjustments to the number of shares in circulation. This situation highlights the evolving landscape of social media platforms and the challenges faced by companies seeking to adapt and grow in a highly competitive market.