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(FILES) X owner Elon Musk speaks at the 27th annual Milken Institute Global Conference at the Beverly Hilton in Los Angeles on May 6, 2024. - (Photo by Frederic J. BROWN / AFP)
Elon Musk’s social media platform X, formerly known as Twitter, is now worth almost 80% less than when he bought it two years ago, according to recent estimates from investment firm Fidelity.
Musk acquired X for $44 billion in October 2022, but Fidelity’s latest evaluation suggests the platform is currently valued at just $9.4 billion.
Fidelity, which discloses the value of its shares in X, revealed that as of the end of August, its stake in the company was worth only $4.2m, marking a 24% drop in value from July.
This figure represents a 79% decline from the $19.66m Fidelity valued its shares at when Musk completed the acquisition.
CNN reported on Wednesday that analysts believe the sharp drop in X’s valuation reflects ongoing struggles with ad revenue, which has been a persistent issue under Musk’s ownership.
Since taking the company private, X no longer publicly releases financial reports, adding to the uncertainty.
An analyst at Wedbush Securities, Dan Ives, told CNN that while user engagement on X remains high, ad pressure is mounting, with many advertisers hesitant to associate their brands with content on the platform.
“Musk clearly overpaid for this asset,” he said.
CNN also highlights a recent global survey by Kantar which found that 26% of marketers plan to reduce ad spending on X, the highest among major global platforms.
This follows Musk’s controversial public statements, which led to a backlash from brands and a temporary halt in spending by some advertisers.
Despite these challenges, Musk remains optimistic about X’s future.
The platform reported 570 million monthly active users in Q2 2024, a 6% increase year over year.
However, research by Similarweb found that US traffic on X has declined, with a 20% drop in monthly active users since Musk’s takeover.
While some investors like Fidelity are lowering their expectations, others remain hopeful.
The managing partner at Deepwater Asset Management, Gene Munster, believes the long-term value of X could exceed its original purchase price, especially as the platform’s data is integral to Musk’s AI ventures.
“Fidelity was overly aggressive. They are essentially cleaning house on the investment,” Munster told CNN.
Munster believes X’s value, bolstered by its data assets, will eventually surpass $44bn, exceeding Musk’s Twitter purchase price.
“If you want a real-time understanding of what people are thinking, Twitter is the best source of that. And that is valuable,” Munster said.
The value of X’s data is amplified by its role in developing Grok, the artificial intelligence chatbot developed by Musk’s startup, xAI, which Munster believes could become Musk’s most lucrative asset.
