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Over the weekend, Twitter owner and CEO Elon Musk said the platform will launch an ad-free subscription tier. This news comes because the social media platform’s value and the CEO’s fortune proceed to plummet.
Forbes now estimates Musk’s net price at $156 billion. Bloomberg estimates it at $139 billion. That is $40 billion to 50 billion lower than the fortune of Bernard Arnault, who heads French luxury conglomerate LVMH (OTCMKTS:LVMUY). Before the Twitter sale closed, Elon Musk was well ahead of Arnault.
Tesla (NASDAQ:TSLA), the electrical vehicle (EV) company at the guts of Musk’s fortune, is down nearly 40% for the reason that acquisition. Its market capitalization now rests at around $440 billion. Twitter’s ad revenue can also be down 40%, in accordance with The Information.
Twitter and Elon Musk
Elon Musk’s reign over of Twitter is impacting greater than just his fortune.
Twitter, which Musk bought for $44 billion, is price over and over greater than the media corporations that feed it stories. For instance, The Recent York Times Company (NYSE:NYT) is price just $5.6 billion as of this writing. Paramount Global (NASDAQ:PARA), which owns CBS News, is price just $13.7 billion as well. News distribution is in crisis and the journalism industry is facing record layoffs.
Some users are fleeing Twitter, claiming it has turn into unusable except as a misinformation platform. Some are going to startups, others to open source Mastodon, which has seen a spike in traffic.
Advertisers are facing hard decisions on where to spend and are generally cutting back. But shares in the highest online ad platforms, Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) and Meta Platforms (NASDAQ:META), are holding up. Meta is up 7% for the reason that Twitter sale closed.
Musk has tried to chop costs by firing people, refusing to pay severance and never paying bills, including those for janitors. It’s not a very good look. Musk also took on $13 billion in debt for the acquisition, with $300 million reportedly due “as soon as this week.” This might also put further pressure on TSLA stock.
What Happens Next?
Twitter is tough to exchange, but it might probably be done. In December, Musk said he was actively looking for a brand new Twitter CEO. But that won’t solve anything unless that person is given autonomy — and that seems unlikely. For now, investors and Twitter users will just must live with the uncertainty.
On the date of publication, Dana Blankenhorn held a protracted position in GOOGL. The opinions expressed in this text are those of the author, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He’s the writer of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available on the Amazon Kindle store. Write him at firstname.lastname@example.org, tweet him at @danablankenhorn, or subscribe to his Substack.
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