Twitter IPO 2.0: Is an X Corp IPO Inevitable?
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The first Twitter IPO date was November 7th, 2013. The IPO price was $26 per share, and the Twitter stock price closed at $44.90 — up almost 73% on the first trading day.
Nine years later, Elon Musk completed his acquisition of Twitter at $54.20 per share.
If you got in at the IPO price and held until October 27th, 2022, the day the takeover deal closed, the investment would have returned an 8.5% compound annual growth rate (CAGR).
If you bought Twitter stock at the closing price on the first day of trading and held until October 27th, 2022, your investment would have returned about 2.10% CAGR.
That’s all in the past.
Table of Contents
Musk Overpaid
Elon Musk now owns Twitter, and it’s evident that he overpaid. Why?
During Tesla’s Q3 earnings call on October 20th, 2022, he said this:
Although, obviously, myself and the other investors are obviously overpaying for Twitter right now, the long-term potential for Twitter in my view is an order of magnitude greater than its current value.
Tech stocks took a beating in 2022, including other social media stocks.
During the period between April 13th, 2022 (the business day before Musk announced the Twitter purchase), and October 27th, 2022:
- Facebook/Meta shares fell 54%
- Snap shares fell 72%
- IAC shares fell 51%
As Musk tried to back out of the deal over the summer, the stock traded to $32.50 (July 12th, 2022), down about 40% from the acquisition price.
Wedbush Securities analyst Dan Ives published a research note in October estimating the fair value of Twitter at $25 billion (~$23.40 per share), 43% below what Musk ultimately paid.
Conservatively, Musk overpaid by 30-40%.
Why is this important?
Musk isn’t the only investor.
Who Owns Twitter After Elon Musk’s Acquisition?
Musk’s acquisition of Twitter was a leveraged buyout. As the Washington Post put it, Musk played the role of a private equity firm.
Musk started with a 9.6% stake in the company he bought leading up to the takeover offer. That stake was worth about $4 billion at the $54.20 offer price.
According to an SEC filing from May 2022, 18 investors would join Elon Musk in his bid to acquire Twitter.
Musk also convinced Saudi Prince al-Waleed bin Talal and Twitter Co-Founder Jack Dorsey to retain their shares.
Cathie Wood of ARK Invest also disclosed a stake acquired through contacts within Andreessen Horowitz, a venture capital firm.
Access to the ARK Venture Fund is now available.
I’m technically a Twitter owner, too, as I bought shares in the fund in October. Read my ARK Venture Fund review to learn more.
Banks provided an additional $13 billion in debt financing ($12.5 billion in loans, $500 million in revolving credit) to round out the purchase. This debt goes against the company’s balance sheet, not Musk personally.
The Wall Street Journal reported in December 2022 that Musk was actively seeking additional private funds.
X Corp Investors List
Note: Some of the figures in the following table are estimates based on several sources. The most useful sources are listed below the table.
Musk’s post-Twitter acquisition stake is approximately 74%, estimated from public filings and multiple reporting sources.
Equity Owner | Approx. Stake | Est. Ownership % |
---|---|---|
Elon Musk (new cash, estimate) | $19.3 billion | 74.14% |
Elon Musk (~9.% stake pre-acquisition) | $4.0 billion | |
Saudi Prince al-Waleed bin Talal | $1.9 billion | 6.03% |
Jack Dorsey | $1.0 billion | 3.17% |
Lawrence J. Ellison Revocable Trust | $1.0 billion | 3.17% |
Sequoia Capital Fund, L.P. | $800 million | 2.54% |
VyCapital | $700 million | 2.22% |
Binance | $500 million | 1.59% |
AH Capital Management, L.L.C. (a16z) | $400 million | 1.27% |
Qatar Holding LLC | $375 million | 1.19% |
Aliya Capital Partners LLC | $360 million | 1.14% |
Fidelity Management & Research Co. | $316 million | 1.00% |
Brookfield | $250 million | 0.79% |
Strauss Capital LLC | $150 million | 0.48% |
BAMCO, Inc. (Baron) | $100 million | 0.32% |
DFJ Growth IV Partners, LLC | $100 million | 0.32% |
Witkoff Capital | $100 million | 0.32% |
Key Wealth Advisors LLC | $30 million | 0.10% |
A.M. Management & Consulting | $25 million | 0.08% |
Litani Ventures | $25 million | 0.08% |
Tresser Blvd 402 LLC (Cartenna) | $8.5 million | 0.03% |
Honeycomb Asset Management LP | $5 million | 0.02% |
ARK Venture Fund | $1 million | 0.00% |
Twitter Equity Ownership Post Acquisition | via AccessIPOs.com | |
Source 1, Source 2, Source 3 |
Musk posted on November 19, 2023, that X Corp investors would own 25 percent of xAI, his new AI company.
https://twitter.com/elonmusk/status/1726177644671091192
What is X Corp?
As of April 2023, it appears Elon Musk has merged Twitter in a new company called X Corp.
It is unclear what the ownership structure of X Corp is today, or what the long-term plan is. Speculation on Twitter suggests X Corp is the beginning of Musk’s “everything app”.
In July 2023, Musk declared the Twitter logo would go away and the app would be called “X” going forward.
The Twitter IPO 2.0 (or X Corp) is Inevitable
Elon Musk is a businessman. And though his primary objective may be to improve the future of humanity, he knows that creating sustainable businesses is needed to advance his causes.
He also needs investors to pull off his various ambitious projects.
Sophisticated investors partner with Musk not to advance humanity but to make money for their clients.
Even the prospect of protecting free speech can’t convince institutional investors to lose money.
The participants in the Twitter takeover have long-term investment horizons.
Venture capital and private equity firms often wait 7-10 years before cashing out of an investment.
These are some of the world’s most experienced and admired investment firms.
The investment thesis to own Twitter from now on is the following:
-
- Musk has a proven track record of building companies (one of the best in history, including PayPal, Tesla, SpaceX/Starlink, Neuralink, and The Boring Company)
- He has significant skin in the game
- Twitter is an extraordinary, wide-moat asset
- Large untapped global addressable market
- The business model transformation makes sense (subscription model, reduced ad reliance)
Above all, Elon Musk’s superpower is convincing millions of people to invest along with him.
Tesla became a trillion-dollar company under his leadership — not because it was worth a trillion dollars, but because it makes cool cars that reduce global carbon emissions.
Long-term investors made money. They’ll invest again.
He also used Tesla’s high valuation to issue new shares, raising enough money to build manufacturing facilities to accelerate growth.
His public company made him the wealthiest person in the world. Not his private ones.
But a critical mass of investors can only invest in Twitter when it’s public again.
The next Twitter IPO will happen when the dust settles, the new business model matures, and robust market conditions favor IPOs.
Transforming Twitter into a recurring revenue business would make it comparable to Amazon, Costco, Spotify, and Netflix.
Thousands of influencers and creators use Twitter to communicate and grow their audiences. These people get $8 of value per month out of the platform.
Twitter is an addictive product like cigarettes, coffee, and Facebook. It’s hard to see users leaving for another platform.
But are there enough users willing to pay? Will casual readers pay?
What is the Next Twitter IPO Date (or X Corp Date)?
It’s too early to know the next Twitter IPO date.
If I had to guess, I’d say at least three years from the completed acquisition.
Musk’s new role as Chief Twit hasn’t started smoothly. He fired half the company and offered a three-month severance to anyone unwilling to work their ass off indefinitely.
His early actions went against the corporate culture, leaving a shell of a company. Many fear the site will suffer from outages due to the lack of engineers.
Advertisers paused campaigns.
Three years should be enough time to overhaul the company and reassure advertisers.
But many factors impact a company’s decision to go public, including market conditions, liquidity needs, and profitability.
If all goes well, Twitter could offer IPO shares to Blue subscribers through an IPO broker.
Twitter Valuation
The Information reported in March 2023 that Musk has placed an internal Twitter valuation at $20 billion in offering stock grants to employees. This is down significantly from the $44 billion purchase price and further evidence that Mush overpaid for Twitter.
X investor, Fidelity, marked down its investment by 71.5% at the end of 2023, according to a disclosure. That would value X at about $12.5 billion.
We won’t get a more accurate valuation until X raises new private funds or goes public.
Employee Ownership
Musk told Twitter employees that even though the company is now public, employees can receive stock compensation.
In a message to employees, Musk said:
Even though Twitter is now a private company, we absolutely will continue to provide stock and options as part of our ongoing compensation plan. The stock plan will be much like that of SpaceX, which has been very successful. As with SpaceX, exceptional amounts of stock will be awarded for exceptional performance.
SpaceX is a 20-year-old private company worth nearly $100 billion. Long-time investors and employees can earn stock compensation and liquidate shares every so often as the company conducts fresh capital raises.
Twitter can mimic this model.
However, SpaceX and Twitter are very different companies.
Musk is building SpaceX to get humanity to Mars. That is not a profitable business, at least not for now.
With a public Twitter, employees and early investors would also have a more liquid venue to redeem shares.
More importantly, Musk could unleash his superpower, using an IPO and public Twitter to attract millions of investors to raise the market cap above the $44 billion threshold, making himself and his acquisition investors whole again.
Will Twitter Be Reacquired?
Possibly. But Twitter is certainly not an attractive takeover candidate today.
From the looks of the first month of operations under Mr. Musk, there’s a lot of work and a long road ahead.
At this point, it’s hard to imagine a Twitter acquisition by a large media company or tech giant.
The culture is in shambles, advertisers are running, and the transition is just beginning.
A more likely scenario is the onboarding of additional private investors. The company may need new funds to invest in growth or support debt payments during the transition.
Some acquisition investors may also want out sooner than later.
An acquisition may be more likely if Musk continues to run Twitter into the ground. Reports of advertisers fleeing and high-profile users refusing to pay the $8 fee could be a sign of calamity to come.
Recent Twitter/X Stock News
01/02/2024: Fidelity marks down X valuation by 71.5%
How to Buy Twitter Stock (X Corp) Today
It’s rather mindboggling that after the Twitter saga of 2022, investors could cash out of their Twitter stock investment one day and turn around a few days later and buy private Twitter stock.
But that’s what happened.
I owned Twitter stock in my IRA before the completed acquisition, and now I own private Twitter equity in the ARK Venture Fund.
All U.S.-based investors 18+ can own X Corp stock through this fund. There are no wealth or income restrictions (available to non-accredited investors).
But the ARK Venture Fund has a long-term investment horizon. Don’t expect quick returns.
The ARK Venture Fund has a $500 minimum investment.
Read my ARK Venture Fund review to learn more about buying Twitter stock before the next Twitter IPO. You can also see screenshots of my personal account.
Disclosure: Long Twitter equity via the ARK Venture Fund. Long TSLA, META, COST.
Craig Stephens is a former IT professional who left his 19-year consulting career at the IRS to be a full-time finance writer. A DIY investor since 1995, he started Access IPOs in 2016 to provide a resource for ordinary investors pursuing access to IPOs. Craig studied Finance at Michigan State University and lives in Northern Virginia with his wife and three children. Learn more about Craig.
Great analysis of Twitter, I learned a lot reading this! I agree Musk’s initial mission was to create an ROI, but once he got into it, it seems he’s discovered he has a whole different mission. I think he’s having many sleepless nights figuring out how to marry the two missions together while not losing all his investors money. I hope it all pays off for him!