X’s Valuation In The Spotlight: Why Did The App’s Net Worth Drop 56% In Just A Year?

Elon Musk caused plenty of commotion when he opted to purchase the popular Twitter app for a whopping $44 billion.

It was indeed a pricey purchase but one that Musk hoped would bring back bigger returns. But it appears that the billionaire tech mogul may have bitten off way more than he can chew as new stats are speaking about the company’s valuation tanking by a staggering 56% in just one year.

Today, the company is valued at a mere $19 billion, as reported by Fortune magazine.

We saw the company’s workforce at X on Monday receive equity in the organization that was valued at $19 billion, which makes the company’s share worth $45 per piece.

So as you can see, it’s near to a 55% less from what the original purchase by the billionaire was worth as per documents seen and was calculated based on a number of factors.

After taking charge, Musk mentioned how he wished for the company to model a compensation plan that’s in place after that seen for SpaceX. The latter is also acquired privately but it forces employees to continually jet out a piece of the shares to those investors located in other places.

Such an equity that Musk’s X is providing to its workforce will be dubbed as RSUs and the latter are gained over a timeframe of four years from the date that it was granted. They need liquidity events like IPOs or sales of the firm if they could be taxed as a source of income, as explained in the company’s internal documents.

For now, what we do know is that all of those working at X were doing so without having the right form of knowledge in terms of how much X is really worth, ever since the tech billionaire purchased it.

But thankfully, this new stock award is giving out the right form of data in this regard and answers the query so well. Still, we feel Musk’s valuation might be a tad bit too much. For instance, the latest on this front has to do with the company’s biggest investors calling out the value to be close to 65% lesser in value than what Musk purchased it for. And Fidelity says it stands by its claims and has the right justification in place for its statements.

Now moving on to what the explanations are in place for the devaluation of X in such a short span of time. The number of reasons being outlined are plenty and seeing the value fall by half is obviously not a great sign.

For starters, experts are talking about the app spending most of last year trying to get rid of its brand awareness globally. This included eradicating journalists and also helping with things like impersonation. But can one simple figure really tell the big picture of a company, considering the fact that such numbers are solely arbitrary?

It all depends on the person calculating the firm’s valuation. It could be an auditor doing the job or a venture capitalist and so on and so forth. As expected, the figures vary remarkably and that’s why we’re seeing Fidelity paint a different picture from what Musk has for X.

Today, the trend of such a massive decline is not something out of the ordinary. Companies like EquityZen also saw such trends arising at a consistent pace among so many private companies.

Now the question is should X be worried that it stands at an approximate value of just $19 billion or not? The answer is yes but for those people who are working there, it’s not a shock at all.

Photo: DIW
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