When Elon Musk calls, you pick up the phone. Right?
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But based on new records, Elon’s friends who entered into his Twitter deal may be wishing they’d missed their call. As I wrote this morning to Fortune:
Last year, Elon Musk polished off his legend as the biggest salesman on the planet by assembling arguably the most prestigious roster of tech superstars ever assembled for a single investment. The Tesla CEO lured several icons from Marc Andreessen to Changpeng Zhao to provide a king’s ransom by bolstering his bid for what now reads like a screaming turkey in 280 characters – Twitter.
In all, Musk raised $7.1 billion of the $44 billion purchase price from 19 prestigious partners. He also borrowed $13 billion from a group of banks including Morgan Stanley and Mitsubishi, so the total equity portion of the transaction reached over $30 billion, with Musk himself providing at least $24 billion. Thus, the partners own just under a quarter of the company. Seventeen players provided cash, while two, Fidelity and Kingdom Holding, controlled by Saudi Arabia’s Prince Al Waleed bin Talal, turned their pre-Musk shares into stakes in the newly private company.
Twitter is now a private company, so its financials are no longer available for review. And of course, investors and outsiders have had a good idea for a while now that things might not be going too well with Elon’s new project. But now we’re getting an idea of how not good they really are, through Fidelity’s Contrafund records. While the fund only owns a small slice of Twitter shares, it is an open vehicle where investors can buy and sell shares, so it must provide a market value for each of its shares every month. And the numbers are nothing short of dire:
In November, Contrafund dropped its shares of Twitter by 56% to $23.5 million. In March, there was another 7.5% hit to $19.5 million. And on May 28, Contrafundo disclosed that, by the end of April, it had subtracted an additional 3.5% from its initial and total valuation, reducing the estimated value of Twitter on your books for $17.65 million for a total of seven months drop of 67%. So Fidelity is now valuing Twitter at one-third of the $44 billion purchase price, or $14.5 billion. That’s half of its market value when Musk disclosed last April that he had started buying shares.
We can apply the same math to the original investment of US$7.1 billion by the 19 partners. By Fidelity’s measures, it is now worth a third of that total, or $2.34 billion, meaning that, as of now, the group has suffered a loss of nearly $5 billion.
You can read the full story here to see what this means individually for Larry Ellison, Sequoia, Andreessen Horowitz Capital Fund and other investors. But suffice it to say that, at least considering how this business has fared so far, being Elon’s friend has not brought benefits.
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This story was originally featured on Fortune.com
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That’s how much money you need to earn annually to comfortably buy a $600,000 home