Elon Musk says the most disgusting things. But the message posted at 1:04 PM on Labor Day is a company leader’s assessment of their own organization that can be extremely negative and self-exposing.
Musk fired this head-spinning salvo in his attack on the Anti-Defamation League, a Jewish-led civil rights organization. The ADL strongly opposes the vicious anti-Semitic tweets by far-right hate groups that X has allowed on the platform. Musk has accused the ADL of being “aggressive in their requests to ban social media accounts for even minor violations” and that the organization is “trying to kill X” to get advertisers off the site. But the most cryptic feature, once again Musk shot himself in the foot, was not putting a number on the financial damage allegedly done by ADL that could cost his partners and creditors.
His amazing math works on the already known business value Twitter. Musk has said the price has been declining several times since buying the platform last October, largely due to declining advertising revenue. Musk bought Twitter for $44 billion, with $13 billion in loans from major commercial and investment banks and $31 billion in equity funding. Of the final installment, Musk contributed $24 billion of his own money, while a group of investor friends Larry Ellison, Ron Barron and Saudi Arabia’s Prince Alwaleed contributed $7 billion.
In the post, Musk charged that “ADL appears to be responsible for most of our revenue loss” and added, “I see no way they are responsible for less than 10 percent of the price loss, so around $4 billion.” It’s reasonable to assume that by “value” Musk means the $44 billion paid for the property, not the equity stake. After all, if you bought a home for $440,000, borrowed $130,000, and paid the remaining $310,000 in cash, and the value dropped, you would calculate the drop in “value” as $440,000 less what the home would fetch today.
By Musk’s calculations, ADL has lost about $4 billion in X’s “value” per hand, and $4 billion represents about 10 percent of the franchise’s total decline in value. That formula puts the total decline at about $40 billion. Since Musk and his partners paid $44 billion, including debt, the platform is now looking to change hands for $4 billion ($44 billion purchase price minus $40 billion in “value loss”) at a 90% discount. In effect, the $31 billion he and his partners invested in equity is almost entirely gone, and much of the debt offered by the cream of Wall Street is sitting underwater, he says.
Does Elon Musk really believe X is now worth $4 billion, as his inflammatory post suggests? Probably not. But it has dealt another blow to its already troubled brand that will further damage its standing with advertisers. His point of view is that exaggerating the pain and throwing numbers around when you’re the victim, when it’s someone else’s fault, can be acceptable. If X actually proves a financial loser, people can forget the excuses and scrutinize the omissions from the mercurial sole proprietor.
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