The company informed its employees that the equity of social media platform X (formerly Twitter) was valued at $19bn. This is a year after Elon Musk purchased it for $44bn.
Two people who are familiar with the issue say that the company sent an internal memo to its staff on Monday in which it announced the awarding of equity or restricted stock units to employees for $45 per share. The document stated that based on the employee equity program, it would be valued at around $19bn.
Fortune reported the new valuation a year ago. Musk was the billionaire entrepreneur who is also the Tesla CEO. He acquired the company, along with $13bn in debt, for $44bn just before the tech stock market crash.
Banks that financed the deal, including Morgan Stanley, Bank of America and Barclays as well as MUFG, BNP Paribas and Mizuho, are now saddled with debt tied to the purchase and have suffered paper losses due to the fall in the value of the company. According to The Information, Musk gave Twitter employees stock awards in late March based on an estimated valuation of $20bn.
X struggled with revenue after many marketers pulled out their ad dollar last year. They cited concerns over Musk’s decision to ease moderation due to his freedom of speech ideals.
Musk stated in July that despite a drastic cost-cutting campaign and a reduction in headcount of more than 80% to 1,500 employees, the company “was still negative cash flow”. This was due to a decline in advertising revenues by about 50% “plus a heavy debt load”.
X is trying to woo advertisers back and diversify revenue streams into subscriptions. Musk and X CEO Linda Yaccarino announced plans at an all-hands last week to offer financial services and facilitate payments via the platform as a way to challenge the banking industry.
Yaccarino stated that revenue grew by a high single digit percentage compared to the previous quarter on a conference call in October. She said that she hoped X would turn a profit in early 2024, with its 245mn active daily users.