A year following Elon Musk’s acquisition of Twitter for $44 billion, the company’s valuation took a significant plunge to $19 billion, as per internal documents. This revision had substantial implications for employees of the rebranded company, X, who were granted shares at a rate of $45 per share, marking the first official confirmation of the company’s value post-acquisition.
Musk’s Twitter Valuation Adjustment
When Musk assumed ownership of Twitter, numerous analysts and experts believed the initial $44 billion valuation to be overly optimistic. Internal documents now reveal that Musk himself values the company at $19 billion. These figures were disclosed through sources at The Verge and are based on the determination of the fair market value of shares by the board of directors at X. Notably, Musk, as the chairman of the board of directors, is yet to form it completely.
Employee Compensation Changes
Since acquiring Twitter, Musk has sought to implement an employee compensation system akin to that of his other venture, SpaceX. SpaceX employees, for instance, have the opportunity to periodically sell a portion of their shares to external investors.
X’s employee stock compensation is in the form of Restricted Stock Units (RSUs). These RSUs accrue over four years and only become taxable income following a specific “liquidation event,” such as an IPO or the company’s sale, as explained in internal documents.
Challenges and Uncertainties
Until recently, X’s employees remained in the dark regarding the company’s true value. However, even Musk’s current valuation is under scrutiny, with major investor Fidelity believing that X’s value has depreciated by 65% since the acquisition.
The more than two-fold drop in X’s value within a year raises questions not only about Musk’s business strategy but also about the factors affecting the value of such companies in a rapidly evolving market, notes NIX Solutions. Whether Musk can stabilize the situation or if the current trend persists remains an open question.