Fidelity was one of several companies that helped Elon Musk acquire social media platform X (formerly known as Twitter) in 2022. The financial firm may have lost money on its investment in the company, according to recent valuation metrics showing the $44 billion it paid. Musk’s opinion may have been too high.
What Happened: Fidelity owns X shares of Fidelity Blue Chip Growth Fund (FBGRX) and regularly reviews social media companies to reflect their valuations based on their financials and peers. It is changing.
As Company X faces concerns about advertising revenue, its stock valuations are often being lowered, and in some months it has seen higher valuations from mutual funds.
According to the latest fund valuation, the Fidelity Blue Chip Growth Fund held $4.19 million worth of X shares at the end of August, TechCrunch reported.
Fidelity valued the stock at $5.5 million at the end of July, and the valuation was lowered further in August.
For context, Fidelity originally invested $19.66 million in X through a mutual fund. Following the latest valuation reduction, Fidelity now values the stock at 78.7% less than its original investment.
With the latest valuation revision, Fidelity assigned a valuation of $9.4 billion. This is a significant discount from Musk’s purchase price of $44.
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Why it matters: Musk acknowledges he may have paid too much for Twitter over the years, but at the same time transforming the company into his vision of an all-inclusive app that includes social media connectivity, video and financial payments. He also has grand plans.
After paying $44 billion for the company, Mr. Musk may have hurt its valuation by lowering the price of stock compensation for employees.
A few months later, when employee stock compensation was announced in March 2023, Twitter was valued at $20 billion. The company’s stock compensation was valued at less than half of what Musk was paid, but the CEO at the time said he was optimistic about the company. .
“The path to a valuation of less than $250 billion is clear, but difficult,” Musk said at the time.
For Fidelity, the loss from investing in X may be minor because the Fidelity Blue Chip Growth Fund mutual fund has a small stake in the company. The fund invests in private and public companies, and currently the fund’s largest holdings are NVIDIA Corporation (13.4%), Apple (11.8%), Microsoft (8.2%), and Amazon.com (8.1%). This is thought to be supported by the fact that and alphabet (6.1%).
In addition to holdings in privately held X Holdings, Fidelity Blue Chip Growth Fund also owns shares in some of the most well-known private companies, including SpaceX, Fanatics, Stripe, Epic Games, Redwood Materials, MOD Pizza, and Relativity Space .
Ark Funds, which owns shares in X Holdings through Ark Venture Fund, also frequently changes the valuation of its shares in social media companies.
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