Fidelity Slashes Valuation of Elon Musk's X by 79% Amid Market Shifts

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In a significant adjustment to its investment strategy, global investment firm Fidelity has drastically reduced the value of its stake in X (formerly Twitter), which is now estimated to be worth only $9.4 billion. This marks a staggering 78.7 percent decrease from the $44 billion that Elon Musk paid for the platform in October 2022 amid a highly publicized and tumultuous acquisition process.

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According to recent regulatory filings, Fidelity now values its investment in X at approximately $4.18 million. Just a month prior, in July, the firm's valuation stood at about $5.5 million, indicating a rapid decline in perceived value. This new estimate places X at less than a quarter of its original purchase price, reflecting growing concerns about the platform's financial health and operational challenges since Musk's takeover.

Fidelity's involvement with X dates back to October 2022, when it invested $300 million as part of Musk's acquisition. Since then, the firm has marked down its investment multiple times, first by 71.5 percent in January 2023 and then by 65 percent earlier this year, culminating in the recent adjustment.

Neither Musk, X, nor Fidelity provided immediate comments on this valuation update. However, it's worth noting that Musk's artificial intelligence company, xAI, has been performing better in the funding arena. In May, xAI raised $6 billion to advance its research and development initiatives, with Musk announcing a pre-money valuation of $18 billion for the venture, which has launched an AI chatbot named 'Grok.' Fidelity was among the key investors in xAI.

The drastic markdown of X's value comes amid ongoing challenges for the platform, including a tough economic environment and heightened competition in the social media landscape. Analysts have suggested that the significant debt incurred to fund Musk's acquisition—split between $6.5 billion in term loans and $6 billion in senior and junior bonds—might further complicate the financial outlook for X. Some lenders reportedly face the likelihood of recovering only 60 cents on the dollar for the loans and bonds tied to the acquisition.

As the situation develops, the impact of Fidelity's latest valuation cut on both X and the broader market sentiment remains to be seen.

Sept. 30, 2024 3:51 p.m. 382

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