Tech

Elon Musk’s Twitter Nightmare: From $44 Billion Dream to 71% Valuation Crash

The acquisition of $310 billion, experiencing a staggering 71% decline, stands as a profound revelation for Musk, the preeminent figure in global wealth during 2023. The unprecedented devaluation of Twitter, procured with a substantial monetary investment, was unveiled in the latest data disclosed by Fidelity, a distinguished investment management entity. On January 2, local time, the revealed figures indicated that the present valuation of the social media platform X (formerly Twitter) has contracted by 71% from the time Musk orchestrated its acquisition at the conclusion of 2022.

Musk’s acquisition of the X platform, valued at US$44 billion (approximately RMB 310 billion), now echoes with a mere resonance of approximately US$12.5 billion (approximately RMB 89 billion), as quantified by Fidelity’s most recent valuation report. This substantial devaluation, surpassing 220 billion yuan, materialized gradually, commencing in October 2022, marking Fidelity’s second downward revision in 2023.

The acknowledgment of the significant drop in valuation became imperative for X officials in October 2023, following the release of an internal stock grant document. The valuation plunge can be ascribed to a formidable crisis in X’s business landscape.

01 Why the Plunge?

The plummeting valuation finds its roots in a colossal crisis faced by X’s business. Firstly, the allure of Platform X to new users has waned, as evidenced by data from the app store statistics website Sensor Towner. The preeminence of instant messaging software like WhatsApp on the App Store and Google Play Store has relegated X, diminishing its appeal to new users.

Secondly, advertisers on the X platform are grappling with significant losses. In early November 2023, Musk’s endorsement of a post containing “anti-Semitic” remarks prompted major financial backers, including Apple, Disney, Comcast, Paramount, Lionsgate Pictures, and the European Commission, to cease advertising on X. Musk’s public confrontations with boycotting clients further exacerbated the situation, leading to a 60% drop in X’s U.S. advertising revenue.

02 X’s Pivotal Risk: Musk

The bulk of X platform’s revenue hinges on advertising sales, subscription services, and data licensing transactions, with advertising revenue constituting a substantial 70% to 75%. The drastic decline in advertising revenue poses an existential threat to X’s survival. Musk’s pronouncements and actions have fueled apprehensions, with the Financial Times predicting X’s potential bankruptcy in its “2024 Global Forecast.”

Musk’s initial actions post-acquisition involved extensive layoffs and purges, affecting various facets of the organization. From customer service to content reviewers, engineers, and core members of the creative team, Musk’s restructuring initiatives resulted in a temporary “paralysis” of the Twitter platform. Alterations to the platform’s moderation policy and verification system further deterred advertisers, causing a sharp decline in the primary source of income—advertising revenue.

03 Eccentric Musk

In 2023, Musk’s personal wealth witnessed a staggering increase of US$108.4 billion (approximately RMB 770 billion), leading the Forbes rich list. His daily wealth increment exceeded 2.1 billion yuan, primarily attributed to the success of Tesla and SpaceX. Tesla’s stock price soared by nearly 130%, accumulating a total market value increase of US$398.3 billion (approximately RMB 2.8 trillion) throughout the year.

SpaceX, Musk’s rocket company, contributed to the surge, aiming to increase its valuation to nearly $180 billion. By the end of 2023, Musk regained the title of the world’s richest man, with a net worth of US$254.9 billion (approximately RMB 1.82 trillion). Musk’s wealth accumulation aligns with his vision of advancing humanity into a multi-planetary species and establishing a genuine space civilization.

The Bloomberg Billionaires Index reveals a collective increase of $1.5 trillion in the assets of the world’s 500 richest entrepreneurs in 2023. Musk’s resurgence as the wealthiest individual is accompanied by the presence of French tycoon Bernard Arnault, Amazon founder Jeff Bezos, Microsoft founder Bill Gates, and former Microsoft CEO Steve Ballmer in the top echelons of wealth.

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