Elon Musk’s Twitter takeover was supposed to be a slam dunk. It was famously revealed during his legal fight to get out of the deal that Elon was getting overwhelmed with people texting him, willing to casually offer hundreds of millions, or even billions of dollars, in support of his takeover. But some of them are deeply, deeply regretting doing so.
I just finished reading an advance copy of Character Limit: How Elon Musk Destroyed Twitter, which is coming out very soon. It’s a fascinating and really revealing book about everything that’s gone on with Elon and the site formerly known as Twitter. It goes into great detail, with lots of behind-the-scenes revelations, about what really went down with the purchase.
One thing that becomes clear in the book is that many of the investors who agreed to back Musk’s bid truly believed that Elon had the secret sauce necessary to revitalize Twitter. They were under the false impression that the (not at all accurate) mainstream narrative about Twitter’s old management being “too woke” and focused on “censoring conservatives” meant that Twitter would be easy to “fix.”
On the whole, lots of people legitimately seemed to think that Elon would sort things out, while some were more skeptical and just wanted closer access to Elon.
They all seemed to think that the worst-case scenario was that maybe it would be a rocky ride, with Musk eventually getting Twitter into shape so that they could get a decent return on their investment. Two years in, I don’t think many expected that their investment (often hundreds of millions of dollars) would be diminished by somewhere in the range of 75 to 85% of its value.
Every few months, there’s another report coming out about how Fidelity has to cut the value of Twitter shares to match the likely market value of the company. This is because Fidelity sprinkled Twitter shares into a whole bunch of its funds, though it did record a very tiny uptick last May. On the whole, though, Fidelity claims the investment has lost about 70% of its value.
The Washington Post recently went to talk with some of those investors, who had been so excited to get in on such a great deal. Many of them don’t seem so enthusiastic any more, including Ross Gerber, a long-time Musk booster who also had a decent stake in Tesla.
“Elon’s done a tremendous amount of wealth destruction since he’s purchased Twitter,” said Ross Gerber, who said he invested less than $1 million, a stake he now considers worthless.
“For the people who put capital into him for any amount,” Gerber said, “ … trying to explain to people how he lost” so much money “is not a fun conversation.”
The article has a quote from the Saudi Arabian fund, Kingdom Holding Co., who had initially been hesitant to back Musk, but then went all in (though they just rolled over an investment from over a decade ago, rather than putting in any new money). The quote is somewhat hilarious. Their initial investment years ago had been a few hundred million, but had ballooned to about $2 billion. And, according to Saudi Prince Alwaleed bin Talal, who seems to have missed out on his opportunity to be a propaganda minister, nothing has changed in the valuation:
“In our books, on my books personally, we are valuing at minimum [at] the entry level that we entered with,” he said last week. “There’s no devaluation whatsoever.”
He has to realize that not a single person on the planet believes him. Even Elon himself has said that the value of the company is less than half what he paid for it.
Still, Alwaleed is apparently betting on the next big grift: that because ExTwitter owns 25% of X.ai, Elon’s attempt to become a big AI company, the valuation is worth it. That… seems like a long shot. First of all, the AI market is already pretty saturated with big players that have much bigger warchests. Already we’re seeing some of the lesser providers effectively conceding and folding. X.ai is still wholly reliant on ExTwitter and its users, which seems likely to limit its growth opportunities as well.
Either way, I’m sure some investors are still happy enough to be involved because they think it will help them get access to future Elon boondoggles, some of which might actually make money somehow. But, for now, at least some of his investors are realizing that they were sold a bill of goods by a traveling monorail salesman.
