It was widely recognized that Twitter’s $44 billion valuation at the time of Elon Musk’s acquisition a year ago was inflated. Now the company’s value has dropped by over 50% to a mere $19 billion.
As per internal documents viewed by The Verge, on Monday, employees at X were granted equity in the company at a valuation of $19 billion, which amounts to $45 per share. This valuation represents a 55% reduction from Musk’s initial purchase price.
The documents note that:
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.
Musk is X’s current chairman but is yet to form a formal board of directors although it has been a year since his take over.
Ever since Elon Musk assumed control of Twitter, he has expressed his desire to structure the company’s compensation plan in a manner similar to SpaceX. SpaceX, despite being privately held, allows its employees to periodically convert a portion of their shares into cash by selling them to external investors.
The form of equity granted to X employees is referred to as “restricted stock units” or RSUs. These RSUs accrue over a four-year period from their initial allocation and become subject to taxation as income upon the occurrence of a “liquidity event,” such as an IPO or the company’s sale, as outlined in internal documents.
Up until this point, employees at X did not have a clear understanding of the company’s value following Elon Musk’s acquisition. The recent disclosure of the stock award details has provided an answer to this lingering question. However, it appears that Musk’s valuation might still be overly optimistic, as one of his significant investors, Fidelity, maintains that X is worth 65% less than its acquisition price.