Fidelity Investments, a major asset management firm, that helped Musk acquire X, has significantly reduced the value of its stake, cutting the platform’s valuation to just $9.4 billion, a steep drop from Elon Musk’s initial $44 billion purchase price.
This represents a sharp 78.7% reduction in value, reflecting growing concerns about X’s uncertain future and the challenges it faces under Musk’s leadership.
According to Fidelity’s Blue Chip Growth Fund, the firm’s investment in X is now worth $4.18 million as of August, down from $5.5 million in July. Fidelity initially invested $19.66 million to support Musk’s acquisition of the platform, but this latest valuation marks a significant decline from the company’s previous stake.
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This marks the latest in a series of downward adjustments by Fidelity over the past year. The firm first cut X’s valuation by 65% in 2023. Fast-forward to January 2024, the global investment firm Fidelity marked down its investment in Musk-run X Holdings (the parent company of X) by a whopping 71.5 percent from the original value.
The continued markdown signals low investor confidence as X struggles to regain momentum amidst rising debt and operational challenges. Despite these significant reductions, neither Musk nor representatives from X or Fidelity have commented on the updated valuation. X’s current valuation of $9.4 billion places it at less than a quarter of what Musk paid for the company. With Musk having secured a $13 billion loan to complete the acquisition, creditors are now facing difficulties recovering even 60% of the loan’s value, adding further pressure on the platform’s financial outlook.
As Fidelity scales back its valuation of X, the platform continues to face hurdles, leaving many questioning its long-term viability. Recall that the platform in September faced a $1.9M fine to end the ban in Brazil. X has been banned in Brazil since late August after a judge ruled that the social media platform did not comply with orders to restrict hate speech and naming a local legal representative.
In response to the platform’s challenge in Brazil, Musk had vowed to defy the court’s orders to take down certain accounts in the country. He called the court’s actions “censorship”, and railed online against de Mores, describing the judge as a “criminal” and encouraging the U.S. to end foreign aid to Brazil. In mid-August, Musk closed down X offices in Brazil. That left his company without a legal representative in the country, a federal requirement for all tech platforms to do business there.
However, despite all these, Musk remains focused on raising capital for his other ventures, including $6 billion for his AI project, xAI, while the future of X remains uncertain.