One of the biggest headlines of 2022 was the acquisition of the social media platform Twitter for $44 billion by Elon Musk.
Since the acquisition, the valuation of Twitter has been cut by several investors. One of those investors has raised the valuation of the platform for two straight months.
What Happened: To fund the acquisition of Twitter, Musk sold a portion of his shares in Tesla Inc TSLA and also got several key backers on the deal including Binance, FTX CEO Sam Bankman-Fried, Twitter co-founder and former CEO Jack Dorsey, Ark Funds and Fidelity.
Fidelity is among the parties that have kept their stake since the acquisition was closed in November 2022 and currently holds a position in the Fidelity Blue Chip Growth Fund mutual fund, which is traded as FBGRX.
Every month, the mutual fund releases details about its holdings and valuations. This information offers insight into how Fidelity appraises the worth of Twitter, currently known as X Holdings.
Fidelity has been reducing the estimated value of its owned Twitter shares in its holdings for multiple months.
Although, in the months of May and June, Fidelity increased its valuation for X Holdings, as reported by Axios. In June, Fidelity increased the value of X Holdings by around 11% and valued the company at $27 billion.
The mutual fund owned a stake valued at $7.6 million, according to monthly disclosures.
Benzinga previously reported that Fidelity valued this stake at $6.6 million in the mutual fund in the month of May, compared to a value of $19.7 million at the end of October. As of the end of May, Fidelity valued Twitter at around $15 billion.
Fidelity cut the value of its stake in Twitter four times since the deal was finalized, the two recent increases are the only times Fidelity has raised the carrying value of its X Holdings stake.
Along with its stake in privately held X Holdings, the Fidelity Blue Chip Growth Fund also owns stakes in some of the most well-known private companies like SpaceX, Fanatics, Stripe, Reddit, Epic Games, Instacart, Redwood Materials, MOD Pizza and Relativity Space.
The mutual fund also invests in publicly traded companies, with Musk-led Tesla the eighth-largest holding, representing 2.3% of the assets under management.
Ark Funds, which owns a stake in X Holdings via the Ark Venture Fund, has also increased its carrying value for its stake since the acquisition was closed.
Related Link: Elon Musk's Reasons For Buying Twitter: 'I Didn't Do It To Make Money, I Did It To Try To Help Humanity'
Why It’s Important: While Musk has acknowledged that he overpaid for Twitter, he remains confident in his ability to turn the company profitable by capitalizing on user engagement.
Musk sought to raise funds in December 2022, aiming for a valuation of $44 billion, which matches the price he paid for the company.
Months later, Twitter was valued at $20 billion when stock awards for the company's employees were announced in March 2023. While the valuation of the stock awards was less than half of the price Musk paid, the then-CEO said he was optimistic about the company.
“I see a clear, but difficult, path to a <$250B valuation,” Musk said at the time.
The two months of increased valuation for X Holdings come as the social media platform has completed several milestones, which may have led to the changes.
The company hired Linda Yaccarino as the new CEO, with her tenure commencing in June.
While Twitter saw lower advertising revenue, reports from Musk and Yaccarino have shown the platform hitting record engagement in recent months.
The increased valuation also came as other social media stocks like Snap Inc SNAP and Meta Platforms META saw increased share prices during the months of May and June, as shared by Axios.
One important note that could make Fidelity’s next valuation figure even more important is the launch of Threads by Meta Platforms and the rebranding of Twitter to X, both of which happened in the month of July.
Could either of those developments lead to a lower valuation? Or could the competition from Threads, which seems to already be short-lived as the platform sees lower user counts and engagement, show the value of X as a leader heading into the future?
Read Next: Cathie Wood Invested In Musk's Twitter Takeover, How You Can Get A Stake For $500
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