I’m not sure exactly what value investors see in X, nor why they believe in its future potential.
But clearly, many are still willing to invest in Elon Musk, and his grand visions of what’s to come, with the platform reportedly raising an additional $1 billion in new equity, which values the company at around $32 billion.
Which is significantly less than the $44 billion Musk paid for it back in 2022. Though some market analysts are indeed valuing X at around that higher price, based seemingly on Musk’s increasing political influence, and the potential opportunities for X that could come as a result.
As reported by Bloomberg, X has gained a new cash injection, with Musk himself reinvesting in the app, as it looks to reduce debt and invest in future development.
As per Bloomberg:
“Elon Musk’s social network X has raised close to $1 billion in new equity from investors, according to people with knowledge of the matter — a deal that gives the company a valuation in line with when Musk took it private in 2022. The company is considering using some of the proceeds to pay down its remaining debt load.”
And it certainly has a lot of debt to pay off, with Musk taking out high interest loans for his initial purchase of the app, which he loaded onto X itself. That’s become a weight around the platform’s neck as it struggles to reach profitability. Which had never been Twitter’s strong suit either, but now, with additional capital to utilize, X may be able to settle a lot of its debt load, and look to a future where it might be able to equalize its intake, and even post an actual profit at some stage.
To clarify, according to reports, X is currently close to breaking even, based on data that X shared with potential investors back in January which suggested that the app brought in $1.2 billion in adjusted income for 2024. That’s significantly lower than X was earning before Musk took over at the app (X generated over $5b in income in 2021), but combined with reduced costs (Musk sacked 80% of staff and eliminated many Twitter offices, among other cost-cutting measures), that would take X to around the same overall income levels that it was seeing before the Musk purchase.
The fact that Twitter wasn’t breaking even at such a significantly higher income rate suggests that Musk was right to slash costs at the app, which has continued to function without the majority of its staff.
Though even so, debt remains a major concern.
As noted, as part of the purchase process, Elon also loaded X with a cumulative debt burden of around $1.2 billion in interest payments per year. So even at much lower overall costs, X’s viability remains precarious.
Yet, even so, investors are clearly okay with that level of risk, with more now signing up to be part of the X experiment, giving Elon and Co. more money to keep operating the flailing social app.
Though “flailing” is probably an unfair characterization. X currently has 250 million daily active users, a usage level that’s remained stable since 2022. Despite all of Musk’s various changes and provocations, X is still hugely popular, and it remains the go-to real-time engagement platform for many communities.
And again, Musk’s newly formed partnership with U.S. President Donald Trump could also present new opportunities. Or at the least, the election result has seemingly had many ad partners re-assessing their X ad spend, and resuming their campaigns in the app.
Though X has also reportedly been coercing some big brands to come back, with the threat of regulatory retaliation via Musk and his government connections if they don’t.
Either way, the app’s fortunes have seemingly seen a marked shift, with X investment also reportedly benefiting from supplemental shares in xAI, Musk’s fast-growing AI startup.
But even so, a $32 billion, or a $44 billion valuation is a major reversal. In October last year, Fidelity valued X at just $9.4 billion.
So what is X’s actual value? I don’t know, and no one else does either, because a lot of it seems to be based on the potential value-add of Musk’s political sway, which may or may not result in long-lasting benefits for the app.
It also means that X’s valuation is reliant on Musk relationship with Trump, which seems destined to crash at some stage.
But right now at least, Elon continues to draw attention, and win the faith of deep pocketed investors.
And X lives to fight on, despite ongoing challenges in reviving its ad business.
