Fidelity, which was among a group of outside investors that helped Elon Musk finance his $44 billion acquisition of Twitter, has reduced its stake in Twitter by 56 percent. The recalculation comes as Twitter examines a number of challenges, many of which are the result of chaotic management decisions, including advertisers pulling the plug.
Fidelity’s stake in Twitter, a top-tier growth fund, was worth about $8.63 million in November, according to the monthly Fidelity Contrafund disclosure and announcement first reported today by Axios. This is down from $19.66 million at the end of October.
Macroeconomic trends are probably partly to blame. Stripe had a 28% internal valuation drop in July, while Instacart lost 75% of its valuation this week.
But Twitter’s bogus post-mask policies clearly haven’t helped.
After Musk made “significant” changes to the backend server architecture, the network became less technically stable. Twitter recently laid off staff in its engineering and public policy departments and disbanded a group responsible for monitoring content and human rights, such as suicide prevention. And the company drew the ire of lawmakers after banning, then quickly reinstating, accounts belonging to prominent journalists.
On the other hand, as Axios business editor Don Primack rightly pointed out in a tweet, Fidelity appears to be heavily reliant on overall market performance when it comes to valuations. The company may not have inside information about Twitter’s financial performance.
The cuts at Twitter are huge, as the company nears paying dividends on $13 billion in debt, while revenue dwindles. A November report by Media Matters for America estimated that half of Twitter’s top 100 advertisers, who have spent a total of about $750 million on Twitter ads this year, no longer advertise on the website. Twitter is heavily pushing its Twitter Blue plan to be more of a profit maker. But third-party tracking data shows it’s been slow.
The New York Times recently reported that some Twitter employees are bringing their own toilet paper to work after the company cut cleaning services and stopped paying rent on several of its offices, including its San Francisco headquarters.
According to the aforementioned Times report, Musk has been trying to save around $500 million in non-labor costs by closing a data center in recent weeks and auctioning off office supplies to recoup costs, he has tried to sell fire.
According to the Wall Street Journal, Musk’s team has separately approached investors for a potential new investment for Twitter at the same initial purchase price of $44 billion.
A poll conducted by Musk asking whether he should resign as company president closed on December 19 and was overwhelmingly rejected by users. Musk responded a few days later, saying he would step down as CEO “as soon as [he] finds someone stupid enough to take the job” and then “just run the software teams and the servers.”
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