Elon Musk purchased X in 2022 for the whopping price of $44 billion. Many saw that as an overpay especially in lieu of the decline in advertising that took place. Musk was ridiculed for the purchase, with some claiming it would end up going bankrupt.
This led to Fidelity to mark down its stake 70% in December.
In spite of all this, it appears things are turning around. A round of funding is being discussed, one based upon a valuation of $44 billion. This is identical to what Musk (and investors) bought the company for in 2022.
There were a couple of recent events that reveal the situation with X and how investors feel about it.
Source
X To Raise Funds At Original $44 Billion Purchase Price
In January, banks holding some of the debt used to finance the Twitter purchase put up large chunks for sale. This, according to a WSJ report was a resounding success.
The total amount sold was $5.5 billion.
This exceeded the original target. Banks were first going to sell $3 billion but demand led to it increasing the offering. A large part of this was based upon the price. The original target was $95 cents on the dollars.
Instead, the $5.5 billion went for 97 cents.
The revenue for the company is still down from its acquisition period. Most of this can be attributed to the fact that advertisers still have not returned after their initial exodus.
What has improved is the profitability. Here is where the cost cutting by Musk and his CEO, Linda Yaccarino, are making an impact.
During the last full year prior to Musk’s takeover, Twitter reported adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of about $682 million and about $5 billion in revenue.
In 2024, X had an EBITDA of about $1.25 billion and annual revenue of $2.7 billion.
So the story is 1/2 the revenue but twice the profit. This comes from cutting the workforce by 75%.
XMoney And Grok3
The move comes at a time when things are being added to the X platform. Details of where the money could be used are scarce but it is likely that some form of debt reduction could take place. If not, development of the platform could accelerate.
We are seeing two major initiatives starting to appear.
Elon Musk long talked about the "everything app". A big portion of this included the idea of payments. Over the past couple years, licenses in the different states were acquired. This will bring XMoney to life.
It will be a payment system that is similar to PayPal. The commercial opportunities on a platform like X are enormous. With the expansion of crypto, especially in light of the expected regulation that is coming forth, this could be a major step forward for the platform.
Not only would X be able to offer out traditional payment services, it could enter the crypto realm. The licensing is already in place.
Another major component is Grok3. This was just released to positive reviews. Its impact upon X is multi-faceted.
From an investor standpoint, X Corp has a 25% stake in xAI. The latest round of funding is projected to put this at $75 billion. This alone makes X Corp's holdings worth just shy of $19 billion.
Then we have the integration into X itself. Grok3, as of now, is available to any user for free. There are advanced features such as reasoning which are available for $40 per month. This might help the revenue's a bit although no word was provided about the agreement between the two companies.
Musk asserts that Grok will never trail in the LLM race once it achieves the top position. Some believe the latest update does that. One thing feeding into Musk being correct is the fact that he has a 200K supercluster of GPUs operating and is working towards 1 million.
This should only serve to make X Corp's holding in xAI more valuable. I would not be surprised to see that end up being worth more than the entire purchase price that was paid for the company. OpenAI is talking about another funding round at a valuation of $300 billion.
AI Delivers Some Big Numbers
There is still a great deal of discussion about hype, bubbles, and the absurdity of these valuations. It remains to be seen if those who carry this view are correct. Certainly, we have a lot of publicity about the potential with little in the way of revenues.
Personally, I do not believe AI is overhyped. In fact, based upon what I foresee as the trajectory, we are under-hyping the impact. It is going to radically alter society.
The entire digital world will change, and rather quickly. By 2030, the Internet will be agentic. Websites will decline as more activity (information) is computer based.
When automation hits, numbers go crazy. We will see volumes like never before. This happened with the stock marker. Compare the number of transactions today versus the 1970s. We now have all processed by computers, with most initiated by them. Back then, human traders were heavily involved in the process.
We are going to see this across the board. All digital activity is going to see an uptick in volume.
Platforms like X and Facebook can leverage this based upon decisions they make. All are incorporating their AI models into the platforms. Agents are next on the list as people start building them.
This will produce some enormous network effects.
It seems like some investors are looking to get into this via X. We will have to see if a funding round does take place.
Posted Using INLEO