Elon Musk’s memo suggests Twitter is worth less than half of what he paid for it

FILE – Tesla CEO Elon Musk speaks before unveiling the Model Y at Tesla’s design studio in Hawthorne, Calif., March 14, 2019. Musk’s legal team is demanding to hear from a whistleblowing former Twitter executive who could help bolster Musk’s case for backing out of a $44 billion deal to buy the social media company. Twitter’s former security chief Peiter Zatko received a subpoena on Saturday, Aug. 27, 2022, from Musk’s team, according to Zatko’s lawyer and court records. (AP Photo/Jae C. Hong, File)

According to estimations based on a leaked memo from the billionaire, Twitter is now worth less than half of what Elon Musk spent for it six months ago after losing more than $20 billion (£16.4 billion) in value.

In a note to the workforce of the social media company, Musk suggested that its current market worth is less than $20 billion. In contrast, he paid $44 billion for it in October 2022.

Following Musk’s tumultuous takeover, the company’s value has drastically decreased. A number of significant advertisers have resigned from the platform, and Fidelity, an important investor in Musk’s acquisition of the business, has written down the value of its holding by 56%.

Platformer and the Information, who broke the news of the document first, claim that Musk’s offer of stock grants served as the basis for determining the value of Twitter.

Stock grants, which are typically used to motivate employees, are a chance to purchase shares that cannot be sold until a specific point in time, as opposed to stock options, which can be sold at any time. The idea is to motivate employees to value their shares at a certain level by a certain date so they can sell them for cash.

Another other internal email sent to Twitter staff members stated that the stock grants might be “sold every six months, based on a third-party valuation.”

Musk’s email also stated that the business was only four months away from running out of money before a wave of high-profile, contentious layoffs.

According to numbers Musk presented in December, Twitter’s workforce has decreased from over 7,500 to around 2,000 people.

I see a clear, but tough road to a >$250B valuation, which would indicate a tenfold increase in share value, he added in his most recent memo to the staff.

According to the memo, the concept would be comparable to what Musk, who also owns Tesla, has implemented at SpaceX, another one of his businesses, which permits employees to buy back shares in the company.

If the company’s value increases dramatically, this can be a lucrative incentive, but it is less flexible than selling a listed stock.

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