Musk’s Math Problem: Find X if you know that Twitter was worth $44B and the company's value fell by 56%
Ever since Elon Musk acquired the social media platform once known as Twitter, the financial health of the company, now operating under the moniker X, has been a subject of speculation and analysis. In this piece, we investigate the decline in X's value and the factors that have caused X's value to plummet to less than half of what Musk paid for it.
Musk’s Math Problem. Reimagined by AI. Ylyth Magazine AIPix. 2023
Ironically, X, which has always been primarily associated with a mathematical unknown quantity that needs to be found, turned into a fairly well-known quantity with Elon Musk's light hand. But let's assume that X still remains a mathematical unknown quantity that we need to find. So, we know Musk paid $44B for Twitter. We also know that the company's worth reduced in just one and a half years by 56%. Find the unknown quantity X. Even a primary school student can solve this easy problem. X = $44B - 56% = $19.36. So, let's try to look from different angles at what could have had an impact on why X minus Twitter is now equal to $19.36B.
In April 2022, Elon Musk, the CEO of Tesla and SpaceX, made headlines with his $44 billion acquisition of Twitter, one of the world's most popular social media platforms. The deal was finalized on October 27, 2022. This move was expected to inject innovation into the platform, but the outcome has been far from expected.
A year post-acquisition, the valuation of X has taken a dramatic downturn. As per recent internal communications, the company is now valued at $19 billion, a stark contrast to the $44 billion Musk initially paid. This represents an approximate reduction of 56% in the company's worth.
Immediately following Musk's acquisition he fired CEO Parag Agrawal and CFO Ned Segal. He then offered employees restricted stock units (RSUs) at $45 per share, a significant discount from the price of X's stock at the time. Employees were excited to receive RSUs, as they represented a potential windfall if the price of X's stock continued to rise.
However, Twitter's stock was suspended from trading and delisted from the New York Stock Exchange on November 8, 2022.
Since then, as we already know, the price of Twitter's stock plummeted by 56%. This means that the value of the RSUs granted to employees has also declined by 56%. This is a blow to employees, who were counting on the RSUs to help them achieve their financial goals.
While RSUs can be a valuable form of compensation, they are also subject to the volatility of the stock market. When Musk acquired X, he valued the company at $45 per share. However, the market has since decided that X is worth less than that.
The decline in the value of X's stock is a negative development for employees and the entire company.
Continue reading after the announcement.
“Dear YLYTH Readers,
YLYTH, our groundbreaking AI-created magazine, is a gift to the world. To sustain this offering, we seek your support. Even a small contribution of $3 can make a significant impact. If just 3% of our readers contribute, it helps keep YLYTH accessible for everyone, regardless of their budget.”
Fidelity Investments, a major investor in Twitter, is painting an even grimmer picture of the company's financial health. In a recent report, Fidelity disclosed that its investment in Twitter has lost 65% of its value. This suggests that Twitter could be worth as low as $15.4 billion.
This is a significant decline from the $44 billion that Musk paid to acquire Twitter in October 2022, and it is also a sign of Fidelity's growing concerns about the company's future.
There are a number of factors that are contributing to the decline in the value of X. First, the stock market as a whole has been in a decline in 2023. Second, there are concerns about the financial health of X. The company has been losing money for several years, and its revenue growth has slowed. Third, there are concerns about the direction of the company under Musk's leadership. Musk has made a number of controversial decisions since taking control of X, and he has not yet articulated a clear vision for the company's future.
The decline in the value of X is a negative development for both employees and the company itself. It will make it more difficult for X to raise capital and to attract and retain employees. It could also damage the company's reputation.
Fidelity's view of X is particularly significant because Fidelity was a major contributor to Musk's takeover bid. This suggests that Fidelity is now having second thoughts about its investment in X.
It remains to be seen whether X can turn around its business and regain the confidence of investors. However, the company faces a number of challenges, and its future is uncertain.
Operational Changes and Their Impact
Musk's tenure at X has been marked by a series of operational overhauls that have raised eyebrows and caused significant turbulence, prompting us to take a closer look at the implications of these changes.
Layoffs:
Musk has laid off a large number of employees since acquiring X, including many experienced engineers and product managers. This has led to concerns that the company will not be able to maintain its technological edge and continue to innovate.
Changes to the verification process:
Musk has eliminated the verification process for notable accounts, such as those belonging to politicians, public figures, celebrities, and journalists. This has led to an increase in spam and misinformation on the platform.
Changes to the advertising model:
Musk has announced plans to change the way that X monetizes its platform. He has proposed a subscription model that would give users certain benefits, such as the ability to see fewer ads and to have their tweets prioritized. This has led to concerns about the future of X's business model.
Rebranding. X instead of Twitter:
Musk has also made the controversial decision to change the name and branding of X. He abandoned the well-recognized Twitter brand, renaming it X and significantly altering its logo. This decision was met with mixed reactions from users and critics alike. Some people praised Musk for his boldness and willingness to innovate, while others criticized him for disrespecting the company's history and for alienating its core user base.
Changes to the content moderation policies:
Musk has loosened the company's content moderation policies, allowing for more controversial content to be posted on the platform. This has raised concerns about the spread of hate speech and disinformation.
Recently, users have been reporting mass and ambiguous bans of their accounts on the platform. Some suspect that Twitter is no longer a democratic platform for different opinions but is instead guided by Musk's subjective views, silencing critics and promoting content that aligns with his own.
Twitter has been accused of attempting to silence its critics several times since Musk acquired the platform in October 2022. For example, in July, Twitter sued the Center for Countering Digital Hate (CCDH) after the nonprofit published research suggesting that problematic content on the platform, such as hate and disinformation, was becoming more widespread. In December 2022, Twitter suspended the account ElonJet, which tracked the movement of Musk's private jet.
In another instance, Twitter silenced a prominent critic, Travis Brown, a software developer residing in Berlin. Brown alleged that his account was suspended on July 1 this year, following his bold claims supported by compelling data. This data shed light on the site's troubling alignment with the far-right, particularly post-Elon Musk's takeover. Brown's revelations served as the foundation for reports by respected outlets such as the New York Times and CNN. These reports not only exposed the prevalence of far-right influencers within Twitter Blue subscribers but also stirred controversy by revealing the reinstatement of thousands of previously banned Twitter accounts, many associated with the far-right ideology.
Undeterred by his suspension, Brown took a resolute stand. He publicly declared his intention to challenge the account suspension in Berlin's court, citing a matter of principle. Brown firmly believes that platforms like X (ex Twitter) should not possess unchecked authority to silence criticism arbitrarily. Despite Brown's persistence, Twitter has maintained a deafening silence, refusing to address the unfolding situation.
By the way, X has also banned the YLYTH account without providing any clear explanation other than the bot response, "Your account was suspended due to violations of our Terms of Service. After reviewing for reinstatement, your account will not be restored." While we recognize that businesses have the right to refuse service or protect their customers and patrons, it's essential to note that being a customer of a business is not precisely analogous to being a user of a social media platform. The lack of clarity regarding bans raises concerns, especially when users are left in the dark about the reasons behind their suspension. This distinction highlights the need for transparency in social media platforms' policies and decisions.
Musk and Twitter's shadow. Reimagined by AI. Ylyth Magazine AIPix. 2023
Advertisers' Exodus
Following the operational changes implemented by Elon Musk, several major advertisers, including General Motors, Ford, and Unilever, have distanced themselves from X. This has led to a significant decline in the platform's advertising revenue, which reportedly fell by over 55% in the first quarter of 2023.
Advertisers are concerned about a number of factors, including the following:
The increase in spam and misinformation on the platform following the elimination of the verification process for notable accounts.
The loosening of the company's content moderation policies, which could lead to the spread of hate speech and disinformation.
In a bid to counterbalance the decline in advertising revenue, X introduced subscription tiers. However, the impact of these new offerings on X's financial health remains unclear.
The exodus of advertisers is a major challenge for X. The company relies on advertising revenue to generate income, and the decline in advertising revenue has put a strain on its finances.
It is unclear how X will address the concerns of advertisers. Musk has said that he is committed to making X a platform where advertisers can feel safe and comfortable placing their ads. However, he has also said that he will not change his approach to content moderation.
The future of X's advertising business is uncertain. However, the exodus of advertisers is a clear sign that Musk's changes to the platform have not been well-received by all stakeholders.
A Look at User Engagement
Beyond financials, user engagement is a critical indicator of a social media platform's health. In X's case, the metrics are concerning.
Web analytics firm Similarweb reports a significant decline in X's user engagement one year into Musk's tenure. Global web traffic to the platform has reportedly fallen by 14%, with a steeper 19% drop in the United States, X's largest user base.
Mobile app engagement has also seen a decline of nearly 18%.
These declines in traffic and engagement are troubling for X. They suggest that users are spending less time on the platform and that its reach is shrinking. This could have a number of negative consequences for X, including a decline in advertising revenue and a loss of market share to competitors.
There are a number of possible explanations for the decline in user engagement. Some users may be unhappy with the changes that Musk has made to the platform, such as the elimination of the verification process for notable accounts and the loosening of content moderation policies. Others may be concerned about the increase in spam and misinformation on the platform. Still, others may simply be bored with X and be looking for other social media platforms to use.
It is unclear whether X will be able to reverse the decline in user engagement. However, the company will need to address the concerns of its users and make changes to the platform that make it more appealing and engaging.
X's Future Outlook
Despite the grim scenario painted by the recent decline in X's financials and user engagement, the company's leadership remains optimistic about its future.
X's CEO, Linda Yaccarino, has reportedly assured financial institutions holding X's debt that the company is on track to turn a profit by 2024. This is based on a number of factors, including the company's plans to increase advertising revenue, expand into new markets, and launch new features.
However, some analysts are skeptical of Yaccarino's claims. They point to the fact that Musk's changes to the platform have alienated some users and advertisers. They also note that the overall tech industry is facing a number of challenges, including a slowdown in revenue growth and rising inflation.
Musk himself has expressed belief in X's long-term potential. In a recent interview, he said that the platform's value could be "an order of magnitude greater" than its current worth. He also said that he is committed to making X a more profitable company.
However, Musk has not provided any specific details about how he plans to achieve this goal. He has also said that he is not interested in short-term profits but rather in building a company that will last for decades to come.
Only time will tell whether Musk and Yaccarino's optimism about X's future is justified. However, it is clear that the company faces a number of challenges in the near term.
Musk's Polarizing Political Stance
Analysts also suggest that a strong reason influencing the outflow of advertisers and users from the platform X (formerly Twitter), could be the reluctance of advertisers, partners, and users to associate themselves with Musk's rather ambiguous political views.
Amid the fervor of social media, Musk found himself entangled in controversy, his statements resonating with an odious tone on matters of global significance. His stance on Russian aggression in Ukraine stirred waves of discontent, especially when his decisions impacted the disconnection of Starlink service, hindering Ukraine's progress in its fight for freedom. In a world where the majority aligns with Ukraine's struggle for independence and democracy, Musk's association with divisive actions has led to a growing rejection of his initiatives, leaving an unpleasant taste in the mouths of many.
Moreover, Musk's choice to extend Starlink communication to the Gaza Strip during Israel's military operation against Hamas stirred further debates. The tech mogul said that he would send Starlink to “internationally recognized aid organizations” in Gaza after a telephone and internet blackout in the city. For some, this move appeared as support for an organization deemed terrorist in several countries, including the United States. Such controversial decisions have cast shadows over Musk's reputation, causing ripples of disapproval among those who perceive his actions as conflicting with global values and peace efforts.
Just a few days ago, The European Union swiftly tested its updated content moderation rules, issuing a public warning to X (formerly Twitter), owned by Elon Musk, for its failure to address illegal content circulating on the platform following the deadly attacks on Israel by Hamas terrorists based in the Gaza Strip. The European Commission also expressed concerns about the spread of disinformation on X regarding the terrorist attacks and their aftermath.
While Musk's bold moves and optimistic outlook might spell a brighter future for X, the current reality is far from promising. As the company grapples with dwindling worth, lost advertisers, and declining user engagement, the road to recovery seems steep and challenging.
With its current worth less than half of what Elon Musk paid for it, the future of X hangs in the balance. The tech industry and investors worldwide keenly watch as this saga unfolds, hoping for a turnaround in the fortunes of this once-popular social media platform.
Be that as it may, the factors that could affect the depreciation of X are subjective in one way or another. There is only mathematics, the objectivity of which cannot be disputed. Returning to the math problem we presented at the beginning, we have one more formula, Musk=X-Twitter, where the values of X and Twitter are already known to us, $19B and $44B, respectively.
So, try to find the unknown value of Musk by using this formula.
