When Elon Musk calls, you pick up the phone. Right?
But based on new filings, friends of Elon who got in on his Twitter deal may be wishing they’d missed his call. As I wrote this morning for Fortune:
Last year, Elon Musk burnished his legend as the greatest salesman on the planet by rallying arguably the most prestigious roster of technology superstars ever assembled for a single investment. The Tesla CEO lured assorted icons from Marc Andreessen to Changpeng Zhao to provide a king's ransom in bolstering his bid for what now looks like a turkey squawking in 280 characters—Twitter.
All told, 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 transaction's total equity portion reached over $30 billion, with Musk himself supplying at least $24 billion. Hence, the partners own a bit less than one-quarter of the enterprise. Seventeen players furnished cash, while two, Fidelity and Kingdom Holding, controlled by Prince Al Waleed bin Talal of Saudi Arabia, rolled their pre-Musk shares into stakes in the newly private enterprise.
Twitter’s now a private enterprise, so its financials are no longer available for review. And sure, investors and outsiders alike have had a pretty good idea for a while now that things maybe aren’t going great at Elon’s new project. But now we’re getting an idea of just how not great they really are, via filings from Fidelity’s Contrafund. Though the fund holds just a tiny sliver of Twitter shares, it’s an open-ended vehicle where investors can buy and sell shares, so it must provide a market value for each of its stocks every month. And the numbers are nothing short of awful:
In November, the Contrafund wrote down its Twitter shares by 56%, to $23.5 million. In March came another 7.5% hit to $19.5 million. And on May 28, the Contrafund disclosed that through late April, it had subtracted an additional 3.5% from its starting, full valuation, whittling the estimated worth of Twitter on its books to $17.65 million, for a total, seven-month takedown of 67%. Hence, Fidelity's now marking Twitter at one-third of the $44 billion purchase price, or $14.5 billion. That's half of its market cap when Musk disclosed last April that he'd started buying shares.
We can apply the same math to the 19 equity partners' original, $7.1 billion investment. By Fidelity's measure, it's now worth one-third of that total, or $2.34 billion, meaning that as of now, the group has suffered an almost $5 billion loss.
You can read the full story here to see what that means individually for Larry Ellison, Sequoia, Andreessen Horowitz Capital Fund, and the other investors. But suffice it to say, at least given how this deal has fared so far, being a friend of Elon’s did not come with benefits.
Shawn Tully
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