Since Elon Musk‘s controversial acquisition of Twitter for a staggering $44 billion, there has been a prevailing consensus that he overpaid for the social media giant. However, recent developments indicate that the extent of this overpayment is widening, leaving many questioning the true value of the platform. Fidelity, an investment firm that aided in financing Musk’s Twitter venture, now estimates Twitter’s worth to be a mere 33 percent of its original purchase price, equivalent to approximately $15 billion. This downward trend in valuation has been consistent since Musk assumed control in October 2022, with Fidelity repeatedly downgrading its stake in the company.
Shortly after the acquisition closed, Fidelity swiftly devalued its stake in Twitter by 56 percent. In subsequent months, the firm continued to revise its valuation, reducing its stake by over 63 percent by February. Most strikingly, Fidelity has recently slashed its stake by a staggering two-thirds, underscoring the ongoing erosion of Twitter’s perceived value.
Musk’s acquisition of Twitter had an immediate impact on the platform’s advertising landscape. The social media giant experienced an exodus of major advertisers, with approximately half of its largest clients discontinuing their partnerships. Even though some advertisers eventually returned, their spending on the platform remained significantly lower than before Musk’s arrival.
In an attempt to offset the losses incurred from the advertiser exodus, Musk introduced subscription-based revenue models, namely Twitter Blue and Subscriptions. Unfortunately, both initiatives have struggled to gain traction. Twitter Blue, an $8 per month subscription service offering premium features, has failed to attract a significant portion of Twitter’s user base. According to researcher Travis Brown, less than 1 percent of Twitter’s monthly active users have subscribed to Twitter Blue.
Likewise, Subscriptions, which allow users to pay a monthly fee to access exclusive paywalled tweets and content from specific accounts, have fallen short of expectations. Musk himself disclosed that he had only 25,000 subscribers, a mere 0.018 percent of his approximately 136.4 million followers at the time.
In an effort to address Twitter’s advertiser-related challenges, Musk announced the appointment of Linda Yaccarino, a former NBCUniversal ad executive, as the new CEO. This move aims to rejuvenate Twitter’s relationship with advertisers, but Musk has made it clear that he intends to remain actively involved with the company. As Twitter enters this new phase, all eyes will be on the direction in which its valuation evolves.