In a stunning turn of events, it has been revealed that X, formerly known as Twitter, is now worth less than half of the $44 billion that Elon Musk paid for it just a year ago. The internal documents obtained by The Verge indicate that the company’s value has plummeted to $19 billion, representing a staggering 55 percent drop. This significant decline in value raises questions about the true worth of the social media giant and its future prospects under Musk’s leadership.
Summary: Elon Musk’s purchase of X (formerly Twitter) is now worth less than half of the $44 billion he paid, signifying a substantial decline in its value.
Elon Musk’s Ambitious Compensation Plan
Since acquiring X, Musk has been vocal about his intention to revamp the company’s compensation plan, drawing inspiration from SpaceX’s model. SpaceX, another company under Musk’s umbrella, allows its employees to regularly cash out a portion of their shares to external investors. In line with this vision, X has awarded its employees equity in the company in the form of restricted stock units (RSUs). These RSUs, earned over a four-year period, are subject to a “liquidity event” such as an IPO or a sale of the company, triggering taxation as income.
X’s Valuation Revealed
For the first time since Musk’s acquisition, X employees finally have insight into the company’s valuation. The internal documents disclose that the company is now valued at $19 billion, a figure that is significantly lower than Musk’s original purchase price. This discrepancy in valuation is further underscored by Fidelity, one of Musk’s major investors, which deems X to be worth 65 percent less than its acquisition price. This revelation raises concerns about the accuracy of Musk’s assessment and the potential impact on the company’s future prospects.
The Board of Directors Role
It is worth noting that, at present, X does not have a formal board of directors. As the company’s chair, Musk holds considerable influence in determining the fair market value per share. This internal process involves consideration of various factors and compliance with applicable tax rules. However, the absence of an independent board raises questions about the transparency and objectivity of the valuation process.
Implications for X Employees
The announcement of X’s reduced valuation has significant implications for its employees. As the company’s worth has declined, so too has the value of the equity awarded to employees. While the precise impact on individual employees’ financial situations remains to be seen, it is clear that the value of their RSUs has diminished. This development may dampen morale and raise concerns about the long-term viability of X as an attractive employer.
Musk’s Vision for X
Despite the decline in X’s value, Musk remains optimistic about the company’s future. He has expressed his desire to model X’s compensation plan after SpaceX’s successful approach. By allowing employees to cash out their shares, Musk aims to create a more dynamic and enticing work environment. However, the significant drop in X’s valuation challenges the feasibility of this vision and raises doubts about Musk’s ability to turn the company’s fortunes around.
X’s Future Prospects
With X’s value now less than half of what Musk paid for it, the company’s future prospects are uncertain. The decline in valuation may deter potential investors and partners, who may question the soundness of investing in a company whose worth has eroded so dramatically. X will need to demonstrate its ability to regain investor confidence, innovate, and adapt to changing market dynamics to secure its position in the highly competitive social media landscape.
The revelation that X is worth less than half of Musk’s purchase price has sent shockwaves through the tech industry. With the company’s value plummeting to $19 billion, concerns about its long-term viability and employee morale have come to the forefront. Musk’s ambitious compensation plan, modeled after SpaceX, may face challenges in light of the significant decline in X’s valuation. As the company charts its path forward, it will need to navigate these challenges and demonstrate its ability to regain investor confidence and deliver innovative solutions in order to thrive in the dynamic world of social media.
Source: The Verge