Elon Musk Effectively Admits That He Set Fire To More Than Half Of Twitter’s Value

For months, Elon Musk has been promising the rapidly dwindling workforce at Twitter that he'd give them stock grants. He'd promised that those grants would come on March 24th, and I can tell you that when normal business hours ended on the 24th with no details, some of those remaining employees were pissed off. However, it was just Musk in typical fashion, being late. Late at night an email was sent to employees on the state of Twitter 20" which also included the details of the grants.

The details, as laid out in the Wall St. Journal, are that employees will get grants that vest over a period of four years, with a 6 month cliff (i.e., nothing vests for the first six months, so try not to anger him or he'll fire you and you'll get nothing) and there will be regular opportunities to cash out.

But the key part is that Musk says the equity grants will be doled out with a company valuation of $20 billion. Remember, just five months ago he paid $44 billion for it, meaning he's admitting that he more or less set $24 billion on fire in five months. That's impressive.

Elon Musk said Twitter Inc. employees will receive stock awards based on a roughly $20 billion valuation, less than half of the $44 billion price he acquired the company for last year, according to an email reviewed by The Wall Street Journal.

Being the master of spin, hype, and marketing that he is, Musk concocted a story about how the valuation of Twitter may go up to $250 billion in a few years:

Mr. Musk in the note to staff said he was optimistic about the social-media company's future. I see a clear, but difficult, path to a >$250B valuation," meaning stock granted now would be worth 10 times more, he said.

I mean, at this point, all of these valuations are just in Musk's head. The only way you know for sure is when the shares are either available on the public market, or there's some sort of outside investment that values the company. So, these numbers are somewhat meaningless. The company could be worth $10 billion or $1 billion or $50 billion.

But the fact that Musk is effectively admitting that he thinks the valuation is around $20 billion is a pretty huge admission of failure. He took an asset that he (perhaps stupidly) valued at $44 billion and knocked off more than half the value. And given that he's prone to overhyping his own works, he's almost certainly over-estimating the value. Great job.

Also, I'm curious how the other equity holders feel about all of this. Now, all of them have more money than they could ever use, so maybe they don't care one bit about this, but I remember hearing from some people how Musk had the Midas touch" and they seemed confident that he'd take their $500 million to $2 billion contributions and turn it into much more. And here he is, just five months later, admitting he's basically set fire to that money.

As for the claim that he'll get it up to a $250 billion valuation, well, anything is possible. But to date, given that he's driven away many advertisers, made the site much more fragile, made it significantly less welcoming in terms of inviting back the most abusive users and filling everyone's feed with about 5 times more ads than before, bet big on the Twitter Blue program that very few people seem interested in... it's reasonable to wonder just how he thinks the site will be valued at $250 billion outside of his head.