Trouble with Twitter investors: Fidelity, one of Twitter’s biggest investors, slashes value of its stake by half

It seems that Elon Musk will be continuing to put out one fire after the other as far as his ownership of Twitter is concerned. Fidelity, one of the largest investors who had helped Musk fund his $44 billion acquisition of Twitter, has reduced the value of its stake in Twitter by 56 per cent.

The recalculation comes as Twitter navigates a number of challenges, most of which come as the result of Musk’s chaotic management decisions. The recalculation also takes into account the exodus of advertisers from the platform.

Fidelity’s Blue Chip Growth Fund stake in Twitter was valued at around $8.63 million as of November, according to a monthly disclosure and Fidelity Contrafund notice first reported today by Axios. That’s down from $19.66 million as of the end of October.

It’s possible that macroeconomic trends are somewhat to blame. In July, Stripe, another investor in the platform had their internal value reduced by 28 per cent, while Instacart’s valuation was reportedly reduced by 75 per cent this week.

But it’s obvious that Twitter’s ambiguous post-Musk regulations haven’t made things any better.

From a technical standpoint, the network has recently been less reliable; last Wednesday, there was a massive outage of the platform after Musk made some major modifications to the backend server architecture. This caused at least half of Twitter users, unable to log in to their accounts, and others to be unable to check their timelines.

Employees in Twitter’s public policy and engineering department were also recently let go, dissolving the team in charge of providing input on content moderation and other concerns like suicide prevention.

Axios business editor Dan Primack pointed out that Fidelity seems to rely heavily on public market performance when it considers valuations. It’s quite possible that the firm doesn’t have any inside info on Twitter’s financial performance.

Twitter is making several cuts as it nears the deadline of making $1 billion in interest payments on its $13 billion in debt, as revenue continues to decline. According to a Media Matters for America survey from November, about 50 per cent of the top 100 advertisers on the platform, who collectively spent close to $750 million on advertisements the previous year, don’t seem to be doing so anymore.

Twitter has also been actively promoting its Twitter Blue strategy in an effort to increase its revenue and profitability. However, Twitter Blue hasn’t really brought in the sort of revenue that Musk and his team were hoping for.

Musk has attempted to save around $500 million in costs unrelated to labour, and over the past few weeks has been shutting down data centres, and offices and launching a fire sale after putting office items up for auction in a bid to recoup costs. Musk has even stopped paying rent for most of the office spaces that Twitter occupies.

Separately, Musk’s team has reached out to investors for potential fresh investment for Twitter at the same price as the original $44 billion acquisition, according to The Wall Street Journal.