- Fidelity has reduced the value of its stake in Elon Musk's social media platform, X, by 78.7%, valuing it at $9.4 billion.
- The fund now values its stake in X at approximately $4.18 million, down from $5.5 million in July.
- This isn't the first time Fidelity has marked down its investment in Musk's ventures, having reduced its investment in X Holdings by 71.5% earlier this year.
- Despite these setbacks, Musk's other ventures, particularly in AI, continue to show promise.
In a surprising turn of events, global investment firm Fidelity has significantly reduced the value of its stake in Elon Musk's social media platform, X, formerly known as Twitter.
The reduction, a staggering 78.7%, implies that the platform is now valued at a mere $9.4 billion, a far cry from its original purchase price of $44 billion in October 2022. This dramatic decrease in valuation is a clear indication of the volatile nature of the tech industry and the challenges that even seasoned entrepreneurs like Musk face.
The tech billionaire, known for his ventures in space exploration and electric vehicles, had acquired the social media company amidst much fanfare and drama. However, the recent valuation by Fidelity suggests that the platform is now worth less than a quarter of its purchase price.
According to TechCrunch, which cited Fidelity's filings, the fund now values its stake in X at approximately $4.18 million, down from $5.5 million in July.
Neither X, Fidelity, nor Musk have commented on this report, which is based on regulatory disclosures. However, this development is likely to stir discussions in the tech and investment communities.
Fidelity's History with Musk's Ventures
It's worth noting that this isn't the first time Fidelity has marked down its investment in Musk's ventures. In January this year, the firm reduced its investment in Musk-run X Holdings, the parent company of X, by a whopping 71.5% from the original value. Despite these setbacks, Musk's other ventures continue to make strides.
In May, his artificial intelligence (AI) company, xAI, raised $6 billion to accelerate the research and development of future technologies. The pre-money valuation of this venture was reported to be $18 billion. xAI, which has unveiled an AI chatbot called 'Grok', managed to secure funds from key investors, including Fidelity Management and Research.
However, the financial challenges faced by X are not unique in the tech industry. History is replete with examples of tech companies that have faced similar valuation issues. For instance, the dot-com bubble of the late 1990s saw many internet companies' stock prices inflate and then crash dramatically, leading to many businesses folding up.
Musk's Ventures Amidst Financial Challenges
Musk's acquisition of the social media platform was funded by a $13 billion loan, which he assured bankers would not result in any losses. The debt was split between $6.5 billion of term loans, as well as $6 billion of senior and junior bonds and a $500 million revolver.
However, lenders are now unlikely to recover even 60 cents on the dollar for the bonds and loans, indicating a significant financial risk.
In a separate development, Musk has been vocal about his views on advertising and its impact on social media platforms. At The New York Times' DealBook Summit, he criticized Disney CEO Bob for pulling advertisements from X, arguing that such actions could lead to the company's downfall.
Musk's ventures into AI have also been noteworthy. His startup xAI recently raised $6 billion in a new funding round, with plans to bring its first products to market. The company has also issued a hiring call for AI developers, emphasizing the need for a rigorous pursuit of truth, irrespective of popularity or political correctness.
