Elon Musk’s X: A Major Decline in Value Since Acquisition

In a stunning revelation, investment giant Fidelity has reported that Elon Musk’s social media platform, known as X (formerly Twitter), is now valued at nearly **80% less** than the price Musk paid for it just two years ago. This shocking depreciation highlights not only the challenges faced by the platform but also raises critical questions about Musk’s judgment and the broader implications for social media in a turbulent advertising landscape.

Staggering Valuation Drop

In October 2022, Musk purchased Twitter for a whopping **$44 billion**, taking the company private. As of the end of August 2023, Fidelity’s estimates indicate that the total worth of X has plummeted to around **$9.4 billion**. This valuation marks a staggering **24% reduction** from July 2023 and a dramatic **79% drop** from 2022, when shares were valued at approximately **$19.66 million**. With X no longer trading publicly, Fidelity’s assessment serves as a critical gauge for the company’s financial health and prospects.

Advertising Concerns Take Center Stage

Analysts have attributed the decline largely to **shrinking advertising revenues**. Under Musk’s direction, the platform has seen a backlash from advertisers concerned about brand safety. According to a global survey by Kantar, **26% of marketers** plan to cut their spending on X next year—the steepest reduction among major ad platforms. Just accounting for **4%** of advertisers finding X ads safe reflects a concerning trend compared to **39%** for Google. This clearly illustrates the challenges Musk faces in stabilizing the platform’s advertising ecosystem.

Expert Views on the Valuation

Industry experts have weighed in on the situation. Dan Ives, managing director at Wedbush Securities, has been particularly critical, stating, “Musk clearly overpaid for this asset.” Ives estimates that the true value of Twitter was closer to **$30 billion** at the time of sale, with its current valuation nearer to **$15 billion**. He emphasizes that while user engagement remains strong, the pressure on ad revenues is a critical hurdle the platform hasn’t effectively managed.

Musk’s Controversial Stance Affects Advertisers

Musk’s behavior has also played a role in the advertisers’ exodus. A notable incident occurred when he promoted an **antisemitic conspiracy theory**, which led several brands to halt their advertising efforts temporarily. While Musk later apologized, he didn’t shy away from a brusque remark telling fleeing advertisers to “**Go f**k yourself.**” Such flippant comments reflect a dismissive attitude towards advertisers that can undermine long-term financial recovery.

Engagement Numbers: A Mixed Bag

Despite tarnished advertising prospects, Musk’s X has managed to attract a larger user base. The platform reportedly boasted **570 million monthly active users** during the second quarter of 2023, up **6%** from the previous year. However, this growth appears offset by declines in user engagement. Data from Similarweb indicates that X experienced a **20% drop** since Musk’s takeover, particularly among iOS and Android users in the United States. It seems that while international traffic remains robust, the platform struggles significantly in its domestic market.

Future Prospects: A Mixed Outlook

Some analysts, such as Gene Munster of Deepwater Asset Management, believe the overall picture is not as bleak as Fidelity suggests. Munster contends that Fidelity was “**overly aggressive**” in its assessments and argues that the data X possesses has intrinsic value, especially for understanding engagement and sentiment in real-time. He points out that X has facilitated the development of Grok, an AI chatbot by Musk’s startup xAI, which could help create a valuable new revenue stream.

The Bottom Line

In summary, Musk’s acquisition of X is shaping up to be a cautionary tale of overreach and miscalculation in the high-stakes world of social media. While user numbers present a facade of success, the underlying financial realities reveal a platform in dire straits. The decreasing advertising revenue, combined with growing skepticism from brands, poses a significant threat to any recovery. As we move forward, it will be interesting to see if Musk can pivot and address these issues or if X will continue its downward trajectory—a valuable lesson for all investors considering entry into the volatile tech market.