Twitter‘s $44 billion valuation at the time of Elon Musk’s acquisition a year ago was widely acknowledged to be inflated. The company’s value has now dropped by more than half to $19 billion.
Twitter’s $44 billion Valuation
According to internal documents obtained by The Verge, employees at X were granted equity in the company on Monday at a valuation of $19 billion, or $45 per share.
This valuation is a 55% discount from Musk’s initial purchase price.
According to the documents:
The fair market value per share is determined by the Board of Directors based on a number of factors in a manner that complies with applicable tax rules.
Chairman of X
Musk is the current chairman of X, but despite the fact that it has been a year since his appointment, he has yet to form a formal board of directors.
Elon Musk has expressed a desire to structure Twitter’s compensation plan similarly to SpaceX since assuming control of the company.
Despite being privately held, SpaceX allows its employees to convert a portion of their shares into cash on a regular basis by selling them to outside investors.
The type of equity granted to X employees is known as “restricted stock units” or RSUs.
These RSUs accrue over a four-year period following their initial allocation and become taxable as income upon the occurrence of a “liquidity event,” such as an IPO or the sale of the company, as outlined in internal documents.
Employees at X did not have a clear understanding of the company’s value prior to Elon Musk’s acquisition. This lingering question has been answered by the recent disclosure of the stock award details.
However, it appears that Musk’s valuation is still overly optimistic, as Fidelity, one of his major investors, believes that X is worth 65% less than its acquisition price.
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