According to Fidelity, Twitter is now worth just one-third of what Elon Musk paid for the social-media platform, which recently marked down the value of its equity stake in the company. As a result, the investment company reduced the carrying value of its shares in Twitter by 56% at the end of November and again by 9.6% last month, according to a filing. The new valuation will affect how much Twitter’s employees can expect to receive from stock awards in the future, and it may have implications for the site’s future ad sales.
A spokesman for Twitter declined to comment. The move comes as the company grapples with slumping ad sales and sweeping changes instituted by its new owner, who has publicly described the site as a “mess” that needs cleaning up. Those comments and his repeated statements that the site is overrun with spam bots have made advertisers wary of the social network.
Several of the people in charge of implementing those changes have left. On Thursday, Musk fired Twitter Chief Executive Parag Agrawal, CFO Neg Segal, and policy head Vijaya Gadde, sources familiar with the situation said. He also fired general counsel Sean Edgett. The firings were related to his claims that Twitter is covering up the number of fake accounts and is ignoring security lapses.
How Fidelity arrived at its new, lower valuation for the company needs to be clarified. The investment firm hasn’t provided any details, and it’s not clear whether it had access to confidential information from Twitter, as is customary in an acquisition. It also needs to be clear how much Twitter has lowered its user numbers.
Musk has acknowledged he overpaid for Twitter, which he bought for $44 billion, including $33.5 billion in equity. But he has insisted that the purchase was necessary to preserve the site as a free-speech town square and complained that Twitter’s estimates of its spam accounts were significantly higher than his own.
In an email sent to Twitter employees Friday, which the New York Times viewed, he said the company is currently worth $20 billion. He also announced a new stock program for the staff, similar to the one he used at SpaceX to incentivize workers: They can sell their shares every six months based on a third-party valuation. The program will give Twitter employees “liquid stock, but without the stock price chaos and lawsuit burdens of a public company,” he wrote. The awards will be doled out based on that current $20 billion valuation. The email outlined a plan for employees to sell their shares in the future, but it took time to determine whether they could use those proceeds to pay down debt. Previously, the company had been offering employees stock options instead of shares that could be quickly sold. That option has now expired, the New York Times reports. The email also included a list of other initiatives the company is taking.
