X, formerly known as Twitter, has seen a significant decrease in value since Elon Musk bought the company and took it private in October 2022, per Fidelity’s estimates.
While the company is no longer publicly traded, Fidelity’s Blue Chip Growth Fund still holds equity in X, and estimates that its holding of shares is worth 80% less than what it was worth immediately before Musk’s takeover.
Twitter’s long and storied fall
Musk’s takeover was riddled with potential pitfalls from the very start, with many equity analysts estimating that the tech-mogul overpaid for the communication platform, having shelled out $44 billion to take the company private.
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Several key factors influenced the social media platform’s perceived decline in value — while there is no 100% reliable way to gauge exact numbers, we do have other metrics at our disposal.
One of the most reliable sources of information we have is the European Union’s Digital Services Act, which X is legally obligated to report to. The latest filing revealed a drop in EU user base from 111.4 million to 105.9 million from August 1, 2023 to July 31, 2024.
X claims that it has 550 million monthly active users, although recent events surrounding the platform being banned in Brazil, as well as internal documents obtained by the New York Times, which suggest that Q2 2024 saw a 25% decline in revenue quarter-over-quarter (QoQ) and 53% year-over-year (YoY) would seem to suggest otherwise, hinting that the platform is losing popularity even in the United States.
Brand image, moderation and advertising on X
Ad revenue is a particularly sore spot — and this point is inseparable from Musk. The billionaire has become an increasingly controversial figure in the last couple of years, going from being the world’s unanimously favorite billionaire to a significantly divisive figure.
Personal opinions notwithstanding, this has damaged brand reputation — and profanity-laden tirades aimed at advertisers did little but pour fuel on the fire. Advertisers and consumers are increasingly wary of the platform, and this ties into our next point — moderation.
The increase in extremist and illegal content on the social media platform is primarily attributed to cost-cutting measures put in place by Musk. X fired as much as 80% of its staff since Musk’s takeover, leading to a severely diminished ability to moderate content — further weakening the platform’s bargaining power in the advertising space.
X isn’t a failure — yet
However, amidst the wide bevy of criticism levied at Musk, it’s important to note counterarguments and countertheses.
Managing partner at Deepwater Asset Management, Gene Munster, believes that the company can recover in the long run and that Fidelity and other detractors fail to recognize several key advantages that X possesses.
Munster noted that the platform is still the best barometer of widespread opinion in the digital world, while also highlighting that the company could be sitting on a treasure-trove of data, drawing attention to the fact that the unexpected and rapid rise of AI, as well as X’s own dealings in that area with its chatbot Grok, could very well lead to a reversal of fortunes.
