X is worth 79% less than when Elon Musk bought it for $44 billion: Report

Simone Del Rosario:

It looks like Elon Musk was right about his $44 billion acquisition of Twitter.

Elon Musk:

“Obviously myself and the other investors are obviously overpaying for Twitter right now.”

Simone Del Rosario:

Quite a few people agreed with him at the time, and now it’s being backed up by a respected investment house.

Asset managers at Fidelity’s Blue Chip Growth Fund say the value of its investment into X has fallen by 78.7% as of the end of August.

The fund invested $19.66 million in the social media company in October 2022, when Musk bought it for $44 billion. By July of this year, they said their investment was worth $5.5 million.

But, wait there’s more.

By the end of August 2024, they valued their investment at $4.19 million, according to recent disclosures.

So if we extrapolate the math here…that means X went from being worth $44 billion in October 2022 to $9.37 billion by the end of August 2024.

It’s far from just one investment house raising questions about X’s value. In October of last year, X issued stock grants to employees at a price of $45 per share. That put the price at around $19 billion. So we can see the trend over the past 2 years.

It’s so bad, the Wall Street Journal said the $13 billion Musk borrowed to buy the company has become the worst buyout situation for banks since the Great Recession.

See… generally when banks loan money for takeovers like this one, they sell the debt to other investors so they can collect fees instead of it sitting on their books.

But they haven’t been able to do that with the X debt without taking losses, because it isn’t making money. Banks call loans stuck on their balance sheets “hung.”

According to analysis from PitchBook LCD, the Twitter loans have hung longer than similar deals in 2008-2009. They said while the Great Recession created more hung loans, banks were generally able to offload the debt within a year, something that hasn’t happened in the case of Twitter, er, X.

But if we go back to that earlier statement:

Elon Musk:

“Obviously myself and the other investors are obviously overpaying for Twitter right now.”

Simone Del Rosario:

Seven banks, including Morgan Stanley, Bank of America and Barclays, still agreed to underwrite the deal even after that infamous comment.

To a certain extent, that is the luxury of being one of the top 5 richest people on Earth. Banks want to do business with you. But it wasn’t just the good nature of banks to loan the $13 billion. They have been collecting massive amounts of interest off the acquisition. Musk himself has said he is paying $1.5 billion each year on those loans, which have significantly higher rates than other loans of this type.