Elon Musk, the richest person in the US, is being treated by lots of people — including President-elect Donald Trump — as a cost-cutting genius. That’s why Trump has put Musk and Vivek Ramaswamy in charge of coming up with plans to drastically slash federal government expenditures.
But when you look at what’s happened to the value of X, the platform formerly known as Twitter, since Musk bought control of it two years ago and fired 80% of its employees, you see that his cost-cutting crusade has turned into a financial fiasco for him and his 19 coinvestors.
It’s important to understand what Musk has wrought at X because he will be trying to do to America what he did to Twitter. And the massive mess that Musk has created at X hasn’t gotten anything like the attention it deserves.
Here’s a reminder.
According to the most recent available numbers, which we’ll get to in a bit, Musk and his co-investors have lost more than $25 billion on their Twitter takeover. That’s right. More than $25,000,000,000.
How can I know that when X is a private company that doesn’t release financial results? It’s because Musk’s coinvestors include the Fidelity group of mutual funds. Fidelity, you see, is required to value its funds’ holdings in X at their market value rather than at their cost because investors buy and sell mutual fund shares based on the shares’ net asset value.
According to Fidelity’s financial filings, its funds’ stake in X has fallen almost 80% in value since the Musk takeover. For example, Fidelity’s Contrafund (FCNTX) valued its stake at $53,469,000 when Twitter morphed into X in October of 2022 but valued that stake at only $11,383,550 as of Sept. 30, the most recent available number.
That’s a 78.7% drop.
Buying Twitter was a $46.5 billion deal: $44 billion went to shareholders and about $2.5 billion went to expenses. Musk and his coinvestors put about $33 billion into the takeover, with X borrowing the remaining $13.5 billion.
Apply a 78.7% drop to that $33 billion investment, and you see that Musk and his coinvestors are down about $26 billion. Of this, about $20.4 billion is Musk’s portion of the loss, and the other $5.6 billion is the coinvestors’ loss.
Obviously, I can’t prove that Musk eviscerating 80% of Twitter’s workforce is responsible for the almost 80% loss that Musk et al. have suffered. No one can. But the evisceration of the workforce and the subsequent evisceration of X’s value certainly raises the question of whether Musk can be trusted to cut federal spending to the bone without inflicting massive damage on tens of millions of people.