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Fidelity’s latest valuation of its stake in X implies that Elon Musk’s social network is worth about 71.5 percent less than when Musk bought the company in October 2022.
Fidelity’s Blue Chip Growth Fund has a relatively small stake in X. A monthly update for the fund listed the value of its “X Holdings Corp.” stake at $5.6 million as of November 30, 2023. The fund’s share of X was originally worth $19.7 million but lost about two-thirds of its value by April 2023 and has dropped more modestly since then.
Fidelity cut its valuation of X by 10.7 percent in November, according to Axios. One question is whether Fidelity sold any of its stake during November, but the latest drop in value isn’t surprising given the recent Musk-related controversies that drove advertisers away from the platform.
“As of Oct. 30 the fund hadn’t sold any of its stake, but the monthly report with the updated valuation doesn’t disclose whether the size of the holding changed,” Bloomberg wrote. “Assuming the fund hasn’t reduced its holding in X, the latest report implies the value of the entire company has also fallen by 72 percent. Fidelity declined to comment.”
X’s ad woes hurt value
Based on the $44 billion that Musk paid for Twitter over a year ago, the drop in Fidelity’s valuation would make the company worth about $12.5 billion. X reportedly valued itself at about $19 billion in October, based on the value of stock grants to employees.
Since Musk took Twitter private, the company’s value and revenue are harder to determine from the outside. As Axios noted, “Fidelity doesn’t necessarily have much, if any, inside information on X’s financial performance, despite being a shareholder in the privately held business. Other shareholders may value their X stock differently.”
X’s finances were shaky enough at the end of October, the one-year anniversary of Musk’s purchase. Musk made things worse in mid-November when he posted a favorable response to an antisemitic tweet. He addressed the antisemitism controversy in a public interview on November 29, telling businesses that pulled advertising from X to “go fuck yourself.”
X has had trouble retaining advertisers throughout Musk’s tenure, due largely to his approach to content moderation. Musk eliminated most of the company’s staff shortly after becoming its owner.
X loses bid to block California law
X is dealing with new regulations on content moderation, both in Europe and the US. Musk’s company sued California in September in an attempt to block the state’s content-moderation law but last week lost a key ruling in the court case.
On Thursday, US District Judge William Shubb denied X’s motion for a preliminary injunction that would have blocked enforcement of the California content-moderation law. The state law requires companies to file two reports each year with terms of service and detailed descriptions of content-moderation practices.
Shubb rejected X’s claim that the law violates the First Amendment. “While the reporting requirement does appear to place a substantial compliance burden on social medial companies, it does not appear that the requirement is unjustified or unduly burdensome within the context of First Amendment law,” Shubb wrote.
The judge agreed with California that there is “a substantial government interest in requiring social media companies to be transparent about their content moderation policies and practices so that consumers can make informed decisions about where they consume and disseminate news and information.”
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