X Platform's Valuation Soars to $44 Billion: Musk's Turnaround Story

X Platform's Valuation Soars to $44 Billion: Musk's Turnaround StoryElon Musk's social media platform, X, has experienced a dramatic valuation turnaround since he solidified his alliance with Donald Trump. From a sub-$10 billion valuation last September, it has skyrocketed to $44 billion, a remarkable surge driven by a combination of Musk's bold strategies and shifting external factors

X Platform's Valuation Soars to $44 Billion: Musk's Turnaround Story

Elon Musk's social media platform, X, has experienced a dramatic valuation turnaround since he solidified his alliance with Donald Trump. From a sub-$10 billion valuation last September, it has skyrocketed to $44 billion, a remarkable surge driven by a combination of Musk's bold strategies and shifting external factors.

According to two individuals familiar with the matter, investors valued X at $44 billion earlier this month in a secondary transaction involving the exchange of existing equity. This valuation not only marks a strong rebound for Musk and his investor group (including Andreessen Horowitz, Sequoia Capital, 8VC, Goanna Capital, and Fidelity Investments), but also establishes a crucial pricing benchmark for X's upcoming primary market financing round. X plans to raise approximately $2 billion in this round, issuing new shares to repay over $1 billion in subordinated debt Musk took on during his 2022 acquisition of Twitter (now X).

Musk's $44 billion acquisition of Twitter in 2022 initially resulted in a drastic downturn. His relaxed content moderation policies led to a mass exodus of advertisers, plummeting the platform's valuation. Fidelity's September 2024 write-down of its stake, indicating a valuation below $10 billion, underscored the immense pressure Musk faced. The current $44 billion valuation signifies a successful rescue of X from the brink.

While X's revenue has declined since Musk took over, two sources indicate adjusted EBITDA for 2024 reached approximately $1.2 billion, largely recovering to pre-acquisition levels. Two other individuals familiar with X's finances confirm that Musk's cost-cutting measures are yielding positive results, improving revenue. However, some suggest that X's profit figures are "overly adjusted." X declined to comment, but the positive shift in its financial situation strongly supports the $44 billion valuation.

Wall Street banks also reflect a positive outlook on X's future. Seven firms, including Morgan Stanley, Bank of America, Barclays, and MUFG, have offloaded almost all of the $12.5 billion in loans used to finance Musk's acquisition. This massive loan initially posed a significant risk for Musk and the lenders. The successful divestment, facilitated by X's rising valuation, signifies investor confidence in its prospects.

The strengthening of Musk's relationship with Trump is also considered a pivotal factor in X's valuation increase. Weeks after Trump's November presidential victory, Musk's role as a close presidential advisor and head of the Department of Efficiency (Doge) reignited investor confidence. This move not only improved X's public image but also attracted increased investor attention.

Furthermore, Musk's linkage of 25% of his AI company xAI's equity to X investors contributed to the valuation boost. With xAI's valuation reaching $45 billion, this equity linkage mechanism directly propelled X's valuation, further bolstering investor confidence.

A banker familiar with X's new funding round stated that it will help "clean up the remaining debt overhang." Two sources confirmed that lending banks have agreed to give the company time to repay the remaining subordinated debt through equity financing, rather than forcing a sale of over $11 billion in loans in January and February. This reflects the banks' optimistic outlook and provides greater flexibility for X's debt restructuring.

With Musk's closer ties to Trump, companies like Amazon have recently increased their advertising spending on X, showcasing a return in advertiser confidence. Simultaneously, X has expanded its lawsuit against brands including Nestle, Lego, Pinterest, and Shell, alleging illegal coordinated boycotts. This aggressive stance underpins X's commitment to defending its interests.

To lessen its reliance on traditional advertising, X is actively pursuing new revenue streams, aiming to become Musk's envisioned "everything app." CEO Linda Yaccarino announced in January the launch of a digital wallet and peer-to-peer payment service, XMoney, later this year, with Visa as its first partner. Furthermore, X plans to integrate xAI's AI technology to revamp its advertising system and leverage xAI's AI capabilities to enhance advertising products and other services. The launch of the third-generation chatbot, Grok 3, this week for premium subscribers further demonstrates X's leading position in AI.

In conclusion, X's $44 billion valuation is a result of Musk's bold decisions, external market shifts, and the company's proactive strategic adjustments. While challenges remain, X's strong rebound reinvigorates the social media industry. The future remains to be seen, but for now, Musk has successfully steered X onto a new trajectory.