Elon Musk Values Twitter at $20 Billion, Announces New Stock Compensation Program

KEY TAKEAWAYS
Elon Musk has valued Twitter at $20 billion, significantly lower than the $44 billion he paid for the platform, and announced a new stock compensation program for employees based on this valuation.
Despite overpaying for Twitter, Musk sees a "clear but difficult path" to a future valuation of $250 billion, potentially increasing the value of current stock grants by 10 times.
Musk views Twitter as an "inverse startup" due to the radical changes made to save it from bankruptcy, though these changes have led to challenges and a loss of major advertisers.
Twitter's current valuation places it slightly above Snap, the parent company of Snapchat, which has also faced financial difficulties.
The new stock compensation program will grant employees stock in X Corporation and allow them to sell their stock every six months, similar to the practice at SpaceX.

 

Elon Musk has placed a $20 billion valuation on Twitter, a stark contrast to the $44 billion he paid to acquire the social media platform, according to reports from Platformer, The Information, and The New York Times.

In a memo sent to staff, Musk revealed plans for a new stock compensation program, with employees receiving stock grants based on Twitter’s $20 billion valuation.

Stock Grants and Future Valuation

Musk acknowledged that he had overpaid for Twitter at $54.20 per share, and price was one of the reasons he attempted to back out of the deal last year.

He sees a “clear but difficult path” to a $250 billion valuation in the future, which could make current stock grants worth 10 times their current value.

Similar to SpaceX, Twitter will reportedly allow employees to cash in their stock grants at specified periods.

Twitter as an “Inverse Startup”

Musk views Twitter as an “inverse startup” due to the necessary and radical changes he has made to save the platform from bankruptcy.

Some of these changes have resulted in challenges, such as the introduction of the new Blue with verification subscription, which led to a wave of fake accounts, and a “general amnesty” policy that brought back some of Twitter’s worst users.

These changes have led to the loss of some of Twitter’s largest advertisers.

A recent report from Vox indicates that over half of the top 1,000 advertisers on Twitter prior to Musk’s acquisition no longer show ads on the platform.

Musk acknowledged that he had overpaid for Twitter at $54.20 per share, and price was one of the reasons he attempted to back out of the deal last year.

This has further exacerbated Twitter’s financial problems, such as its significant debt and several outstanding bills owed to landlords, an advisory firm, a private jet company, and others. 

Fidelity also reduced its stake in the company from $53.47 million to $23.46 million last year, while Twitter’s revenue decreased by approximately 40% year over year in December.

Comparison to Other Social Media Platforms

The current $20 billion valuation places Twitter slightly above Snap, the parent company of Snapchat, which has recently faced an advertising slump and predicted a decline in revenue. 

With a market capitalization of around $18 billion, Snap has about 375 million daily active users, while Twitter reported 237.8 million users in its final public disclosure before going private.

New Stock Compensation Program Details

In the memo discussing the new stock compensation program, Twitter employees will receive stock in X Corporation, the holding company Musk used to acquire Twitter.

These awards will be granted based on the $20 billion valuation. Twitter plans to allow employees to sell their stock every six months, similar to the practice at SpaceX, Musk’s privately held rocket manufacturer.

This approach will enable employees to have “liquid stock, but without the stock price chaos and lawsuit burdens of a public company,” according to Musk.

Despite the challenges that have arisen from the company’s overhaul and loss of advertisers, Elon Musk remains optimistic about Twitter’s future valuation and growth potential.

Time will tell if Musk’s ambitious goals for the platform will come to fruition.

Craig Miller

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