Fidelity, which was among the group of outside investors that helped Elon Musk finance his $44 billion Twitter takeover, has slashed the value of its Twitter stake by 56%. This major recalculation comes as Twitter navigates several challenges, most of which resulted from chaotic management decisions, including an exodus of advertisers from the network.

Infidel

As of November, Fidelity’s Blue Chip Growth Fund stake in Twitter was valued at around $8.63 million. This valuation was according to a monthly disclosure and Fidelity Contrafund notice first reported by Axios. To give a little bit of context and put this into perspective, Fidelity had a stake valued at $19.66 million in October.

Macroeconomic trends are likely to blame. Payment platform Stripe suffered a 28% internal valuation cut in July, while Instacart had to struggle through a 75% valuation cut. Twitter’s policies are now an absolute wreck, which doesn’t help the matter at all. 

With the insane staff cuts and policy tweaks, Twitter’s networks have, at a technical level, become less stable. Back in December, Twitter suffered several outages after Musk made ‘significant’ backend server architecture changes. Not even the company’s public policy and engineering department was exempt from the culling, with the group even being dissolved simply as a part of Musk’s broader reformation plans; that’s another ethics and rights group gone. Twitter also managed to further get under the skin of regulators for supposedly banning – and then quickly reinstating – the accounts of prominent journalists.

Axios’s Business Editor Dan Primack pointed out that Fidelity relied heavily on public market performance where it concerns valuations. It’s possible that Fidelity doesn’t have inside information on Twitter’s financial performance. 

Twitter is said to be approaching $1 billion in interest payments due on $13 billion in debt, along with revenue dips. Media Matters for America’s November report outlines how half of Twitter’s top 100 advertisers seem to no longer be advertising on the platform. Twitter heavily publishes its Twitter Blue subscription offer, aiming to make it a larger profit driver, but various third-party tracking data suggest that it’s yet to take off. Some Twitter employees have started bringing their own toilet paper after Musk also took out a chunk of the company’s janitorial services. 

The Wrap

Twitter has been battling a slew of rebalancing efforts and cost-cutting strategies ever since Musk took the seat of the Chief Twit. Musk has attempted $500 million in costs unrelated to labor, according to a report from The Financial Times, over the past few weeks shutting down a data center and launching a fire sale after putting office items up for auction in an attempt to recoup costs. Fidelity’s tale is but a cog in the current Twitter machination that determines whether or not it’ll stick around. At most, it helps paint a picture of just how much change Twitter has undergone ever since falling into Musk’s grasp. Can it recover? Perhaps. If one thing is for sure, it’s that 2023 will be a make-or-break point for Twitter. 

Sources 

https://bit.ly/3ItUhiG