Elon Musk, the CEO of Twitter, has reportedly offered stock grants to the company’s staff at a valuation close to $20 billion, as per The Information’s report on Saturday. This valuation is only half of what he had paid to acquire Twitter, which was $44 billion in October last year. Despite the significant drop in Twitter’s value since the acquisition, the offer is still higher than the public market valuations of its competitors, indicating that Musk recognizes the company’s potential.
In December of last year, Elon Musk stated that Twitter was making progress towards achieving “roughly cash flow break-even” by 2023, despite the fact that top advertisers had reduced their spending on the social media platform following his acquisition.
According to the report, Musk has predicted that Twitter will generate revenue of less than $3 billion this year. With the consideration of the company’s $13 billion debt, the valuation of nearly $20 billion offered by Musk implies a multiple of 11 times this year’s revenue, resulting in an estimated enterprise value of $33 billion.
Following his acquisition of Twitter, Elon Musk disclosed that his company was losing $4 million per day. In an effort to reduce costs, the billionaire implemented significant layoffs, letting go of almost 70% of the company’s workforce. At the time, Musk explained that the staff reductions were necessary due to the daily losses being incurred by the company. He stated, “Regarding Twitter’s reduction in force, unfortunately, there is no choice when the company is losing over $4M/day.”
In January of this year, a research firm reported that advertising spending on Twitter had fallen by 71% in the previous month of December. This decline was attributed to top advertisers reducing their spending on the social media platform following Elon Musk’s takeover. Additionally, in the month of November, Twitter ad spending had dropped by 55% compared to the previous year. Another report indicated that Twitter’s revenue had decreased by 40% year over year.
Advertising continues to be Twitter’s main source of revenue, and following Elon Musk’s acquisition, the social media company experienced a significant departure of top brands. Nonetheless, Musk was able to entice some advertisers back by offering substantial discounts. Additionally, he has implemented a subscription-based verification system to help bolster the company’s revenue.
