Global investment firm Fidelity cut off its Twitter stake by 56% in November, according to a monthly disclosure released by the company. The social media giant is currently weathering multiple storms mostly arising out of bad decisions by the management.
- Fidelity’s current stake in Twitter is evaluated to be around $8.63 million as of November 30, a major downgrade from the $19.66 million reported at the end of October
- The company that funded Elon Musk’s $44 billion buyout was among Twitter’s top shareholders in December 2021
Fidelity had more than 17.6 million shares in the company, which amounted to around $890 million.
Why did Fidelity Lower its Twitter stakes?
Fidelity’s decision could have something to do with macroeconomic trends. In July 2022, global fintech giant Strip implemented a 28% internal valuation cut, and Instacart relinquished 75% of its stakes.
However, the valuation cut first reported by Axios could be a direct consequence of recent blows suffered by the company. Despite Elon Musk’s publicly driven decision to step down, Twitter has not been able to improve because of its unreliable policies.
On Wednesday, the company suffered outages after Musk changed its backend server architecture. It is no secret that the platform is operating at a reduced efficiency as of late.
The social media giant has offloaded workers in the public policy and engineering department, thereby terminating the group responsible for overseeing content moderation and human rights-related problems. Some Employees were reportedly carrying their own toilet paper to work as the company blocked their janitorial services to ease up their finances.
In addition, Twitter refuses to pay the rent for several offices, including the headquarters in San Francisco. Last month, the platform banned several journalists from the platform without providing any explanation.
The list of suspended accounts includes reporters working for The Washington Post, The New York Times, Voice of America, CNN, and other outlets. Musk accused journalists of using his private information, but regulators disapproved of the resulting ban within the company.
However, some sources argue that Fidelity highly depends on public market performance regarding valuations. The firm might not be privy to Twitter’s financial records.
The company now has to meet $1 billion in interest payments due on a debt of $13 billion. Moreover, Twitter has lost half of its top 100 advertisers that invested around $750 million combined on Twitter ads in 2022.
Twitter now hopes to fall back on the Twitter Blue plan (a monthly subscription that allows users exclusive access to app customizations). Still, according to third-party tracking data, it has not made much of a difference.
When did Fidelity invest in Twitter?
Considered one of Massachusetts’ biggest private companies, Mutual Funds, owned by Fidelity, invested in 2.4 million shares of Twitter days after it was launched in 2014.
Fidelity’s Contrafund bought 1.1 million shares worth $73 million in the social media company by the end of November 2014. However, the fund with net assets worth $109 billion had made a significantly bigger investment on Facebook, estimated to be around $1.6 billion.
Around 30 Fidelity funds bought shares in Twitter, but the financial services giant clarified that it wasn’t ready to make big investments in a microblogging site like Twitter. Nevertheless, Twitter’s stock market value as of 2023 is $41.09 billion despite the loss in revenue.
Since they started to ping their trade in the world of technology and social media, Fidelity has been in a good position, unlike Twitter. The Boston-based investment firm committed more than $316 million to back up Elon Musk’s Twitter takeover.
It was among the 19 backers of Musk’s $44 billion bid, and the Tesla chief executive officer and SpaceX founder acquired more than $7 billion from the investors, according to a report by The Wall Street Journal.
Over the past few weeks, Musk tried to cut costs by up to $500 million, as The New York Times reported, after shutting down a data center and staging an auction for office items. His team tried to attract investors who could make fresh investments in Twitter at the same rate as Musk’s original $44 billion bid.
The Tesla owner recently polled Twitter users asking if he should step down as the CEO, and voting closed in favor of him leaving. Musk then declared that he’d resign as CEO “as soon as [he found] someone foolish enough to take the job.”