Elon Musk says the most outrageous things. But the message he posted at 7:04 p.m. On Labor Day evening may rank as the most negative, in fact self-indicting, assessment a corporate leader has ever issued about their own enterprise.
Musk fired off this head-spinning salvo in his attack on the Anti-Defamation League, the Jewish-led organization civil rights organization. The ADL had strongly objected to virulently anti-Semitic tweets from far-right hate groups that X permitted on the platform. Musk charged that the ADL was “aggressive in their demands to ban social media accounts even for minor infractions,” and that the organization was “trying to kill X” by pressing advertisers to avoid the site. But the most mystifying feature wasn’t that, once again, Musk shot off his mouth and hit his foot, but that he actually put a number on the financial damage allegedly inflicted by the ADL that’s likely to floor his partners and lenders.
His astounding math applies to the present value of the business formerly known as Twitter. Musk’s said many times since he purchased the platform last October that its worth has plummeted, largely via a disastrous drop in ad revenue. Musk bought Twitter for $44 billion, funded $13 billion by loans from big-name commercial and investment banks, and $31 billion in equity. Of the latter portion, Musk contributed about $24 billion of his own cash, while a group of investor friends including Larry Ellison, Ron Baron, and Prince Al Waleed of Saudi Arabia provided $7 billion.
In the post, Musk charges that “ADL seems responsible for most of our revenue loss” and adds, “I don’t see any scenario where they’re responsible for less than 10% of the value destruction, so around $4 billion.” It’s logical to assume that by “value,” Musk means the $44 billion paid for the property, not the equity portion. After all, if you bought a house for $440,000, borrowed $130,000, and funded the remaining $310,000 in cash, and the price fell, you’d calculate the fall in “value” based in how much less than $440,000 the dwelling would fetch today.
In Musk’s reckoning, the ADL singlehandedly vaporized roughly $4 billion in X’s “value,” and that $4 billion accounts for around 10% of the entire decline in the franchise’s worth. That formula puts the total fall at $40 billion. Since Musk and partners paid $44 billion including debt, he’s implying that the platform would now change hands for $4 billion (the $44 billion purchase price minus the $40 billion in “value destruction”), for a drop of 90%. In effect, he’s saying that the $31 billion he and his partners invested in equity is totally gone, and a big portion of the debt from provided by the cream of Wall Street sits far underwater.
Does Elon Musk really believe that X is now worth $4 billion, as his scorching post suggests? Maybe not. But he’s just inflicted still another battering on his already beleaguered brand that will further undermine its standing in the eyes of advertisers. His view may be that it’s acceptable to exaggerate the pain and throw around numbers when you’re the victim, when it’s somebody else’s fault. If X indeed proves a financial cataclysm, people are likely to forget the excuses, and examine the careening missteps from its mercurial sole proprietor.