Musk Reportedly Cuts Twitter Valuation in Half but Sees It Rising Over Ten-Fold

Elon Musk, who bought Twitter last year and took it private, has now reportedly cut the valuation by over half to a mere $20 billion but sees the social media company’s valuation eventually rising to over $250 billion.

Last year, Musk acquired Twitter at $54.20 per share at a valuation of $44 billion. During Tesla’s Q3 2022 earnings call, he admitted that he overpaid for the company. He was apparently looking to renegotiate the deal at better terms. However, Twitter took him to court for backing out of the acquisition. Tesla’s CEO finally relented and bought the company at the original terms.

Musk lowers Twitter valuation for stock options

Now, the billionaire has offered employees stock options at a valuation of $20 billion and said in an email that Twitter “can be thought of as an inverse startup.”

Notably, in December Musk invited investors to invest in Twitter at the same terms as he did. However, in just about three months, he has slashed the valuation by over half.

To be sure, Musk is not alone in slashing Twitter’s valuation. In November, Fidelity, which is also a co-investor in Twitter, slashed the valuation by over half.

Meanwhile, in the typical Musk way, he said “I see a clear, but difficult, path to a >$250B valuation,” which would mean Twitter’s valuation rising around 12-fold from the current levels.

Musk has made exorbitant claims about Tesla also

During the Q3 2022 earnings call, Musk predicted that Tesla’s market cap would one day surpass the combined market caps of Apple and Saudi Aramco. He reiterated similar views during the Q4 2022 earnings call and said, “long term, I am convinced that Tesla will be the most valuable company on earth.”

Notably, Musk has said that over the long term, Tesla’s deliveries would grow at a CAGR of 50%, and expects the company to sell 20 million cars in 2030. To put that in perspective, that is almost twice what market leader Toyota sold in 2022.

Musk is trying to turn around Twitter

It’s been just around five months since Musk acquired Twitter and took it private. However, it has been chaos so far and Musk has made several changes at the company.

Soon after he took over, Musk fired many Twitter employees, including the top brass. The company’s then CEO Parag Agrawal was reportedly escorted out of the office. Many more Twitter employees quit after Musk asked them to commit to “hardcore” work.

Twitter had nearly 7,500 employees when Musk took over. While a CNBC report said that the company’s full-time employees are down to a mere 1,300, Musk said that the number is closer to 2,300. All said, even going by Musk’s numbers, the company’s workforce is down by almost 70%.

Twitter faces several lawsuits

Twitter is also facing lawsuits from several entities including landlords, a software provider, an M&A advisory company, and a jet company. The company allegedly failed to make the due payments which forced the affected parties to file the lawsuit.

Some reports even suggest that Twitter employees were forced to carry their own toilet papers to the office.

Twitter would now charge $1,000 for the gold verification for companies, something which a lot of companies find a little too high. It has already started to charge for the blue tick verification. The company charges $8 monthly if the subscription is taken on the web. However, the price rises to $11 for subscriptions on Apple and Google app stores.

The higher pricing on app stores is apparently to offset the fees that these platforms charge.

Twitter’s ad revenues have plummeted

Twitter ad revenues have meanwhile plummeted since Musk took over. Musk himself admitted to the exodus of advertisers from the platform. However, we still don’t have any official data on the company’s ad revenues. Given the fact that Twitter is no longer a publicly traded company, we might not get a hard number on its ad revenues, which before Musk’s acquisition accounted for the bulk of its revenues.

Earlier this month, Musk said that Twitter’s revenues in 2023 would be below $3 billion. The Information, which also broke the story of Musk lowering Twitter valuation, reported that going by the numbers, Twitter is valued at 11x enterprise value-to-sales multiple as compared to an average 2023 enterprise value-to-sales multiple of 4.5x for Meta Platforms, Snap, and Pinterest.

Also, Meta Platforms is hugely profitable despite losing billions of dollars towards the metaverse. As for Twitter, Musk said last month that the platform is nearing breakeven.

Tesla brand has taken a hit amid the chaos

Multiple surveys have shown that Musk’s Twitter ownership negatively impacted Tesla’s brand.

Musk answered the popularity question by pointing to his 127 million Twitter followers. He said, “That suggests that I’m reasonably popular. It might not be popular with some people, but for the vast majority of people, my follower count speaks for itself. I have the most interactive account — social media account, I think, maybe in the world, certainly on Twitter, and that actually predated the Twitter acquisition.”

Cathie Wood of ARK Invest admitted that some people might not buy Tesla cars. However, she is still quite bullish on the company and added more Tesla shares after it crashed. 2022 was in fact the worst year for Tesla stock as it lost 65% in the year.

Musk said Twitter is reaching breakeven

All said Twitter’s turnaround under Musk has been far from satisfactory so far. The mercurial billionaire has also made conflicting remarks. While he touted bankruptcy as a possibility for Twitter, soon enough he said that the company is reaching breakeven.

All said, since Musk acquired Twitter, the microblogging company has been invariably in the news, quite often for unpleasant reasons like layoffs, snags, and lawsuits. It remains to be seen if Musk would be able to make Twitter a $250 billion company.

However, given Tesla’s success and its humongous valuation, we cannot rule out similar “magic” at Twitter, even if it looks quite a tall ask.