Musk Puts $20 Billion Value on Twitter
Elon Musk offered Twitter employees stock grants at a valuation of roughly $20 billion, said a person familiar with an email Musk sent to staff, less than half what he paid to buy the company. It was a concrete acknowledgment of how much Twitter’s value has dropped since the deal—but it is still well above public market valuation levels for Twitter’s rivals.
To be sure, Musk’s assessment isn’t far off what mutual fund giant Fidelity, one of his backers in the takeover bid, reportedly values Twitter at. Fidelity has cut its internal estimate for its Twitter shares by 60% in recent months, Axios has reported. A $20 billion valuation implies a 55% cut.
It’s possible Musk feels constrained from slashing Twitter’s valuation any lower because the outside investors who backed his bid, which include Andreessen Horowitz and Sequoia, paid for shares at the $44 billion valuation of the takeover. Indeed, if Twitter was valued at the same multiple as its public rivals, its equity would be close to worthless.
It’s also possible Musk and other investors would argue that Twitter deserves a higher multiple because of its potential to grow faster than its public market counterparts. (Platformer earlier reported the $20 billion valuation).
In his email to staff, Musk said that Twitter “can be thought of as an inverse startup,” an apparent reference to the fact that he has slashed Twitter’s staff by 75%, shrinking its workforce to its earlier days as he attempts to transform the company by broadening its revenue to include subscriptions as well as advertising. Twitter’s ad sales have fallen roughly 40% since Musk took over the company, as his changes have unnerved marketers.
Musk said in the email that “like a smart startup, it is important that individual financial incentives align with the company.” While he acknowledged the big drop in Twitter’s valuation from its $44 billion acquisition price, he said “I see a clear, but difficult path” to a valuation of more than $250 billion. That would mean stock granted now would be worth 10 times more in the future, he said.
Musk told employees he is aiming to do “liquidity events,” where employees could sell their equity for cash “every six months, based on a third party valuation.” He said that was modeled closely on how his rocket company SpaceX works, “which I think achieves the public company advantage of having a liquid stock, but without the stock price chaos and lawsuit burdens of a public company.”